85% Mortgages Based On Valuation. Are They real?

Is the 85% LTV buy to let mortgage on valuation really back? OK I know everyone wants it but, wishing it will return wont bring it back.

There has been rumours abound of mythical hedge fund finance, hotmail addresses promising 100% buy to let finance and all sorts of deals promised but many of these are simply hot air.

And I should know – I follow these developments like a hawk because if these deals were available I know you would want to know straight away, and I would tell you.

Now I do feel strongly about giving you my view on this because I know many of you are considering doing these schemes because we are all desperate for more flexible finance and you’ve been told that this is a solution.

So lets look at whats on offer and I’ll tell you my thoughts:

85% loan to valuation

Upfront application fees to a hedge fund 85% on valuation deals.

Well theres a few of these doing the rounds at the moment however they currently seem to be in two categories.

1. Some are charging decision in principle (DIP) fees of several hundred pounds. You pay your money upfront often to an introducer (not usually regulated) who sends it to a lender (but they wont tell you the lenders name – why is that?) and it can come back as a decline and you’ve lost your application fee.

So, my questions on these deals are:

1.1 Why cant you say the lenders name? What lender do you know that doesnt release its name when deciding to lend funds?
1.2 Who does the application fee go to?
1.3 Why is it upfont and non-refundable just for a DIP? What comfort do I have on this that you arent just making it up?
1.4 And sometimes, and I kid you not I’ve seen it – why have you got a hotmail address. Surely if you a reputable lender/broker you could afford
your own domain name!

RB Verdict: Stay clear of sending any money until you’ve found out who the lender is and what their refund policy is.

Massive Application fees on Private finance 85% on valuation deals.

2. Other deals entering the daylight are ones where decision in principles are free but to reserve the funds you have to pay huge (and I mean huge) application fees (20k plus VAT ouch!) and that is only the beginning. There are also fees per property as well.

Now may questions on these types of schemes are:

2.1 Why 20k, isnt that a tad excessive!
2.2 Can I pay the 20k on completion of my first mortgage
2.3 What is the name of the lender?
2.4 Is the introducer involved regulated and therefore liable for any advice given.

RB Verdict: Why is the application fee so excessive? What happens if every property you try to buy is turned down at application stage and then the funds are withdrawn, have you lost your 20k.

85% loan to purchase/70% loan to value

And finally you have the entrance of two bridging companies Tiuta & Drawbridge – who have entered the 85% buy to let mortgage world – albeit only if you buy under market value and
the loan to valuation isnt over 70%

Now these deals are transparent and you know who the lenders are. However they’re still not cheap! Initial rates are coming in at 6.99%/8.99% (and has 3% fees) however a decision in principle shouldnt cost you anything.

RB Verdict: Both lenders have a strong track record in lending and you can utilise the services of a reputable directly authorised broker like ‘resident broker’.

So now lets drop to:

80% loan to value.

Well there been a lender offering this for a while but its costs and product have put alot of people off.

You are looking at a rate of 6.49% with 130% rental cover based on a capital repayment basis.

RB Verdict: Difficult to get this to actually fit many properties with the type of rentla cover needed. If you can find the extra 5% and drop to 75% lending you will have more choice.

75% loan to value.

OK so we are in more familair territory now. There are a number of lenders at this level. And one of our favourites BM Solutions often has very competitve products available at this loan to value.

RB Verdict: At the moment this loan to value is where you need to be for standard buy to let mortgages. You can get 9 from BM SOlutions/C&G and lenders like Natwest will allow 10.

60 – 70% loan to value.

You will now have access to almost all the buy to lenders in the market.

There are lenders like Godiva mortgages that really do have some very low rate/arrangement fee products.

RB Verdict: It is at this level where you may benefit from remortgaging away from your existing lender to help you save money. Always check with an expert though as the devils in the detail and its not always about rate.