BTL Second Charge Mortgages / No Monthly Payments

BTL Second Charge Mortgages / No Monthly Payments

21:59 PM, 30th October 2013, About 11 years ago 145

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No this is NOT a wind up, it’s 100% genuine and is important that you know how it works so that at the very least you can make an informed decision about new financing choices which until now have been unavailable to buy to let landlords.

It really is a fantastic way to improve cashflow and rental profits or increase gearing without the need to remortgage.

A very credible mortgage lender (Castle Trust) is offering second charge buy to let mortgages with no interest charges and no monthly payments based on 20% of value subject to both the first and second mortgage combined not exceeding 85% LTV on BTL deals and 80% on your own home.

You can use the money in whatever way you wish, for example:-

  1. You can use it to pay down existing mortgages
  2. You can save the money for a rainy day
  3. You can use the money to buy more property
  4. In fact, you can blow it all at the local casino if your daft enough too!

So what’s the catch?

With no monthly payments or monthly interest charged, the lender must get paid somehow. This product works with a profit share basis, in that you borrow 20% of the value of your property the lender will take 40% of any increase in value – on sale or refinance.

You will also need to obtain permission from your existing mortgage lender for a second charge to be added.

Given that your equity in the property may represent as little as 15% of the value of the property and you will receive 60% of the capital appreciation you don’t need to be Einstein to work out that it’s better to use their money than yours, especially if you use the extra money raised to purchase more properties. Remember, you will not be making any payment or incurring any interest whatsoever until you sell or refinance.

Imagine if somebody put this deal to you …. I want to buy a property, you put 20% of the money and I will put in 15% and borrow the remaining 65%. I take all the rental profit/losses and when we eventually sell the property I will get 60% of the capital appreciation and you will get 40%. Oh and by the way, I will decide when we sell, OK? You would probably say no wouldn’t you? Well if you put that deal to Castle Trust, chances are they will say yes providing you have a good credit rating. It really is that good.

Basic criteria

The loan term can be up to 30 years if the equity loan is secured against your own home, 10 years if it’s a rental property.

Your total LTV must not exceed 85% on a rental property, 80% if the loan is secured on your own home..

There are no limits on the number of properties the lender will consider lending on per borrower and their maximum loan exposure to any one client is £1 million.

The minimum advance is £10,000.

For rental properties there is no requirement to have a first mortgage.

You must be able to prove that you have been a landlord for at least six months to qualify and you also need a decent credit score.

Pros and cons?

I can see several reasons why this will be attractive to landlords and I will be using this product myself for the following reasons …

  1. Deals may not stack up on rent to ordinarily qualify for an 85% LTV mortgage but may do so on this basis
  2. It’s a relatively easy way to raise capital against the security of your existing rental portfolio or your own home
  3. Improved cashflow when compared to a conventional mortgage for a higher amount
  4. Raise money without paying off an amazing tracker or fixed rate deal arranged pre-credit crunch
  5. Avoid potentially extortionate fees associated with refinancing
  6. Increase borrowing without affecting cashflow
  7. Use of other peoples money to increase leverage and returns on capital invested
  8. Castle Trust do not legal or valuation fees to arrange finance on your own home and their arrangement fees are only 1% of the advance. Valuations on rental properties cost £195+ VAT and conveyancing costs £216. This means that total fees are likely to be significantly less than arranging a conventional remortgage.
  9. Some landlords will wish to borrow 20% LTV via Castle Trust to partially redeem their mortgage with another lender and thus benefit from improved cashflow.
  10. Some landlords will wish to utilise this product to borrow more money
  11. Some landlords will wish to mix and match, i.e. reduce existing interest bearing debt and increase overall gearing to 85% LTV

Downsides

  1. Your risk is higher than that of Castle Trust because they get paid back before you do on the basis they have second charge over the property. Therefore, if the property decreases in value then you carry the majority of the risk. However, unless you’ve come to the end of the loan term it’s up to you to decide when you sell, they have no say in it.
  2. Future remortgaging may prove more difficult
  3. No new build property, i.e. properties built in the last two years
  4. The product is only available on properties located in England and Wales (not Scotland or Northern Ireland)
  5. 40% reduction in any future capital appreciation but you do need to consider that you may well be able to use the money to make a better return elsewhere
  6. The improved cashflow, in comparison to an higher traditional mortgage, will increase taxable income. However, many will see that it’s better to pay tax on profit than to have no profit at all
  7. Early repayment charge of 5% in year one
  8. If you wish to repay the loan without selling the property then you are committed to proving Castle Trust a return equal to the greater of 2% per year for the period which the loan has run or 40% of the rise in property price
  9. You will need to contact your existing mortgage lender before progressing matters to establish whether they will allow a second charge to be taken

We have no idea how long this funding will be available for so if this is of interest we recommend you to get in quickly. BTL Further Advances No Monthly Payments

We will be arranging introductions to brokers on a panel of specialist advisers which I have personally hand picked. The role of the adviser will be to review your portfolio and provide you with bespoke advice and quotations based upon your personal circumstances.

We are also considering the demand for free of charge introductions to a non-advised mortgage packager service. However, unless you consider yourself to be a sophisticated investor and in need of no advice and associated protection we strongly recommend you to obtain professional advice from our carefully selected panel of advisers.

Obviously we want to make some money out of this too so we are charging a fee of for introductions to our panel of professional advisers. By charging for the introductions we, and the advisers we are referring to, recognise that only serious enquirers will progress matters. This is a good way to ensure that our advisers are not bogged down answering questions from time wasters and also provides a very a good reason for our recommended advisers to prioritise our referrals.

Our fee for arranging an introduction to a professional adviser, who will visit you to provide face to face advice if that is required, is £200, payable to Innovative Landlord Solutions LLP (the legal owner of Property118.com) either by credit/debit card or via PayPal. You will then be contacted within 7 days.

Professional Adviser Introduction Request Form

  • Fees are non-refundable


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Howard Reuben Cert CII (MP) CeRER

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12:28 PM, 15th November 2013, About 11 years ago

Reply to the comment left by "Ian Ringrose" at "15/11/2013 - 11:06":

Hi Ian

interesting that you ask for a low rate on a low'ish LTV - 3x NEW BTL products were launched yesterday as follows;

BTL 1.99% 2yr Tracker Free val/legals/2.5% fee Max loan £250k/Max LTV 60%

or

BTL 70% 3.19% 2yr Tracker Free val/legals/£900 fee Max loan £250k/Max LTV 70%/MCF £99

or

BTL 75% 3.49% 2yr Tracker Free val/legals/£900 fee Max loan £250k/Max LTV 75%/MCF £99

ps - The above BTL rates are also available for Holiday Let mortgages.

Mark Alexander - Founder of Property118

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12:45 PM, 15th November 2013, About 11 years ago

Reply to the comment left by "Howard Reuben" at "15/11/2013 - 12:28":

Hi Howard

What is MCF?
.

Ian Ringrose

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12:54 PM, 15th November 2013, About 11 years ago

Reply to the comment left by "Howard Reuben" at "15/11/2013 - 12:28":

Howard,

I don’t consider any mortgage when the “deal” is less than 5 years and ideally I want fixed rate.

Howard Reuben Cert CII (MP) CeRER

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13:37 PM, 15th November 2013, About 11 years ago

@Mark Mortgage Commitment Fee
Some mortgage products require a Mortgage Commitment Fee, which is charged when you apply for the mortgage and is not refundable.

@Ian ... but you didn't say that a 5 year deal was your preference in your previous post, just "Now if I had a 65% LTV loan at a very low rate on a property I did not expect to go up in value a lot, but was giving me a good cash flow, I would be jumping at this" 🙂

The Castle Trust deal is not for everyone, granted, but then no mortgage product is for everyone. However, working with a whole of market Adviser (ie NOT a mortgage salesman or tied agent - always ask if they work on a restricted panel, or are whole of market, including Full Members of the NACFB in order to access full market availability) and you will (should?) always receive the most suitable recommendations providing you with the deals that you are personally eligible for and that meet your current requirements and future flexibility options too.

You can always check whether a Broker is an NACFB member by putting their post code into the online directory here > http://www.nacfb.org/find_a_broker.html

(Mine is CO3 3AX 🙂 )

Regards

Howard

Mark Alexander - Founder of Property118

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13:46 PM, 15th November 2013, About 11 years ago

Reply to the comment left by "Howard Reuben" at "15/11/2013 - 13:37":

Thanks Howard, I've learned something new today. MCF (Mortgage Commitment Fees) didn't exist when I was broking (1987 to 2009). Instead lenders simply added a margin to what their panel valuers charged and badged the fees as an "Application Fee" which obviously covered the cost of the mortgage valuation. Presumably the model I am more familiar with is still being utilised by lenders. It must have created a nightmare scenario for the programmers of the "best advice" mortgage sourcing systems programmers!

Good advice about checking out NACFB members by the way.
.

Howard Reuben Cert CII (MP) CeRER

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14:49 PM, 15th November 2013, About 11 years ago

Reply to the comment left by "Mark Alexander" at "15/11/2013 - 13:46":

Thanks Mark for "Good advice about checking out NACFB members by the way.".

I think that it's imperative that a borrower deals with the most suitable professional available. Any mortgage salesperson can take an exam (or 12) and get letters after their name (and yes, I do have several of those too) but to be independently scrutinised by 3rd party professional associations and to be accredited and approved under their remit, I believe, adds testimony and endorsement and true credibility.

In short, I strongly recommend that a borrower seeks assurances that a Broker is not only qualified, but also independently approved too.

The Castle Trust product (the origination of this thread) can be 'sold' by any Broker now (either direct or via chosen 'packagers') but surely the advice should only come from professionally sanctioned 'Advisers'?

This fella looks quite acceptable > http://www.property118.com/member/?id=314

🙂

Adrian Matthews

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15:43 PM, 18th November 2013, About 11 years ago

Do you know what the situation would be if Castle Trust goes bust?

Mark Alexander - Founder of Property118

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15:58 PM, 18th November 2013, About 11 years ago

Reply to the comment left by "Adrian Matthews" at "18/11/2013 - 15:43":

The funding is via JC Flowers. Now I'm not saying that they can't go bust, Lehman Brothers manages to. However, people with loans from Lehman brothers didn't just walk away owing nothing. The loan notes were sold on to other financial institutions who continued to be bound by them, much the same as happened to MX and Northern Rock. Therefore, there is little point hoping that your mortgage lender goes bust, their borrowers will never benefit from it.
.

Howard Reuben Cert CII (MP) CeRER

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16:07 PM, 18th November 2013, About 11 years ago

Reply to the comment left by "Adrian Matthews" at "18/11/2013 - 15:43":

Taken from their website - Castle Trust is the trading name of Castle Trust Capital plc and its subsidiaries.They’re authorised and regulated by the Financial Conduct Authority. Consumer credit licence 644974/2. Registered office 10 Norwich Street, London EC4A 1BD.

Usually savers and investors worry if a bank goes bust - whereas you would owe them money, not the other way round 🙂

As Mark says above, the typical process is for the 'mortgage book' to be sold / passed on and the new owner would be your new lender.

To find out how much you would possibly owe at any one time, we have produced a helpful calculator which I will be pleased to send to you if you make contact via my member profile.

Hope this helps.

Mark Alexander - Founder of Property118

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16:16 PM, 18th November 2013, About 11 years ago

Reply to the comment left by "Howard Reuben" at "18/11/2013 - 16:07":

Hi Howard

I have slightly amended your last post and removed the link to the download. We do not allow links to downloads on other websites, particularly files such as Excel spreadsheets which can include macro's. This is because we could be held liable if the files were to become corrupted by malware such as computer viruses. I trust you will understand.
.

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