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Buy to Let Mortgages
At Precise Mortgages we offer a diverse range of products available for you to purchase your property, refinance an existing mortgage or raise additional funds.
We have different products depending on whether we will have a first or second charge over your property. Whilst your chosen financial adviser will be able to tell you more about the products that we offer, hosted below is further information that helps to explain a little more about our buy to let first charge mortgages.
Information about buy to let mortgages
Buy to let mortgages are not regulated by the Financial Conduct Authority (FCA) and will be unregulated unless they are ‘consumer buy to let’.
A buy to let mortgage will not normally be classed as ‘consumer buy to let’ unless you only have one property and didn’t purchase that property to let, for example, you inherited the property or originally purchased it to live in. ‘Consumer buy to let’ are subject to the requirements of the Mortgage Credit Directive Order, (the Order) which is supervised by the FCA.
If you have a buy to let mortgage that is not classed as ‘consumer buy to let’, we will include an offer condition in the mortgage offer explaining that as the agreement is fully or predominantly for the purpose of a business carried on or intended to be carried on by you, you will not have the benefit of the protection and remedies available under the Order. You agree to this by signing the mortgage deed.
The buy to let mortgage products that we offer
The key difference between the products that we offer is essentially the initial product fees we charge and the rate of interest that is payable on the amount you have borrowed. Alternative product options include:
- A fixed and then variable interest rate – the interest rate will be fixed for an initial period and then a variable rate tracking LIBOR.
- A variable rate – the interest rate will be a variable rate tracking LIBOR. The margin above LIBOR may be the same for the whole term of the mortgage or change after an initial period.
An interest only mortgage of £119,757.50 payable over 7 years initially on a fixed rate for 2 years at 3.19% and then on a tracker rate for the remaining 5 years at 4.65% above 3 month LIBOR giving a current rate payable of 4.95% (variable) would require 24 monthly payments of £322.37 and 60 monthly payments of £499.49.
The total amount payable would be £160,076.15 made up of the loan amount plus interest (£157,463.79) and a product fee £1,796.36, lender’s legal fee £216, valuation fee £445, funds transfer fee £35, and a redemption administration fee £120.
The overall cost for comparison is 4.8% APRC representative.
IF YOU FAIL TO KEEP UP WITH PAYMENTS ON YOUR MORTGAGE A ‘RECEIVER OF RENT’ MAY BE APPOINTED AND/OR YOUR RENTAL PROPERTY MAY BE REPOSSESSED.
- What is LIBOR and how our products track this
Where the rate of interest we charge is variable it will be set as a margin above the London Inter-bank Offered Rate for 3 month sterling deposits (LIBOR). That rate is set by ICE Benchmark Administration Limited and was previously known as BBA LIBOR.
LIBOR changes every business day but we only change the rate of interest you pay four times a year on the 12th day of March, June, September and December (or the previous business day if that day isn’t a business day).
On those days we will re-calculate the rate of interest you pay by taking the LIBOR rate, rounded up to 2 decimal places (i.e 0.511% would be rounded up to 0.52%), and add the margin to it. The margin we add (which may change during the mortgage term depending on the product you choose) will be set out in Section 4 of your mortgage offer.
We last reset LIBOR on the 12th September 2017 at 0.30%.
The interest rate you pay may be subject to an interest rate floor. This means that if LIBOR were to fall to 0.00% or less the rate payable will be 0.00% plus the agreed margin above LIBOR. This means that the rate payable will never go below 0.00% plus the margin above LIBOR.
If you had a variable rate mortgage at a margin of 4% above LIBOR for the term of the mortgage then the rate of interest you pay would change 4 times a year on 12th March, 12th June, 12th September and 12th December.
We would take the LIBOR rate on each of those days and add the margin to it. The table below illustrates how the rate of interest you pay may change based upon different LIBOR rates.
Date If LIBOR on that date was and the margin was Then the rate of the interest you pay would be 12 March 0.56% 4% 4.56% 12 June 0.54% 4% 4.54% 12 September 0.54% 4% 4.54% 12 December 0.52% 4% 4.52%
Your monthly payment will change the month following the change to the rate of interest.
The mortgage illustration that your financial adviser will give you will illustrate how an increase in the rate of interest will affect your monthly payment.
For more information about LIBOR visit theice.com/iba/libor. More information on how we calculate the rate of interest is contained in our 'General Mortgage Conditions' - click here for England and Wales, or here for Scotland.
- Early repayment charges
If you repay all or part of your mortgage early you may need to pay an early repayment charge. Details of any early repayment charges will be set out in the mortgage illustration and mortgage offer. The early repayment charge will be a percentage of the amount repaid and the mortgage illustration and mortgage offer will explain the amount of that percentage, the period it is payable for and give an example of how much would be payable on the amount repaid.
- Repaying your mortgage
Our mortgages are for a minimum of 5 years and maximum of 30 years.
Repayment option - available for buy to let and residential mortgages
If you have chosen the repayment option, you pay off some of the amount borrowed every month together with a payment of interest charged on your mortgage. This means that your mortgage balance will reduce every month and by the end of the mortgage term your loan will be repaid.
Interest only option - buy to let mortgages only
If your mortgage is interest only, your monthly payment only covers a payment of interest charged on your mortgage. At the end of your mortgage term, you will still owe the amount that you borrowed, and will need to repay this as a lump sum. It is important that you have a separate savings plan in place to repay the amount borrowed on an interest only basis at the end of the mortgage term. You should check regularly throughout the mortgage term that the performance of your savings plan is sufficient to be able to repay the amount you have borrowed at the end of the mortgage term.
If you don’t keep to the terms of the mortgage or make payments on a day other than the 1st of each month then if:
- You have chosen the repayment option there is likely to be a balance outstanding at the end of the mortgage term that you will need to pay as a lump sum payment, or
- If you have chosen the interest only option the amount you have to repay at the end of the mortgage term is likely to be more than you originally borrowed.
Remember, if you are concerned that you will be unable to meet your mortgage repayments now or in the near future, please ensure you call us as soon as possible on 0800 781 8558.
- What fees and charges you may be required to pay
We’ve created a booklet, called ‘Tariff of mortgage charges’ that provides details of our fees and charges that may be payable in connection with your mortgage. You can see this booklet here. In addition you may need to pay a product fee, the amount of which will vary depending on the product you choose, the amount of this fee will be included in Section 8 of the Mortgage Illustration and Mortgage Offer.
It is important to remember that your adviser may charge you for advising you on your mortgage. Please ensure that you check this with them and confirm what their charges will be.
Should you wish to, you are able to make lump sum or regular overpayments on your mortgage. If you choose to do this an early repayment charge may apply if this payment is made within the period that early repayment charges are applicable.
If you do wish to make an early repayment, you will need to confirm the following to us:
- If you are making a payment to repay the mortgage either fully or partially
- That you wish us to use that payment to reduce the balance on which we charge interest.
If the above information is not received, the overpayments will not reduce the balance on which we charge interest or cause a change to your monthly payment.
- Your property
We are able to lend on properties in England, Wales and Scotland, subject to certain restrictions on the types of properties that we will lend on. Please note postcode restrictions apply within Scotland. Your financial advisor will be able to provide you with further information on these restrictions.
To help us confirm whether properties are adequate security for the mortgage, a property valuation is required for all cases.
We obtain valuations from a valuer that is listed on our panel of approved independent surveyors and valuers. Whilst we arrange the valuation, it is important to remember you will be responsible for paying the costs of this. Your adviser will be able to confirm the full details of the valuation costs for you.
The valuer will be able to provide either a Standard Report or a Homebuyers Report, depending on what you ask for. The valuer is not our agent for the purposes of any valuation or report and we accept no responsibility for the contents of any valuation or report (whether a Standard Report or a Homebuyers Report).
This is a report that the valuer carries out for our benefit only to confirm that the property is good security for the amount of loan that you asked for. The report provides basic information about the property and its condition.
Although the report is prepared for us, you will receive a copy for your information as a courtesy only. It is important that you do not rely on this report as it has not been prepared for you and therefore will not provide you with the detail you may need.
If you are purchasing a property, it is particularly important that you are fully aware of the condition of the property and understand if any repairs are required before you buy. Once you have purchased it, you have to maintain the property in good repair as a condition of the mortgage and this can be expensive if major repairs are required. If you need more specific information on the condition of the property please obtain an independent valuation or seek advice before you proceed with the purchase.
The Standard Report is not prepared for you and the valuer will not accept any responsibility to you for the Standard Report.
This is a detailed report on the property and will highlight if there are any defects or repairs required.
This type of report may be particularly important to you when you are buying a property, as the valuer will carry out a full inspection and comment on other matters that may help you decide whether to proceed with the purchase.
The report is prepared for you by the valuer, but the valuer will also include an assessment of the property for mortgage purposes. This mortgage assessment is given to us to confirm that the property is suitable for the mortgage. You will receive a full copy of the report.
The Homebuyers Report is prepared for you and any claim you may have in relation to that report should be made against the valuer, not us.
For the purchase or remortgage of a property, we will instruct a solicitor or other conveyancer to act on our behalf, ensuring that the property will be satisfactory security for our loan and that we have a charge over it.
We will normally instruct the same conveyancer who is acting for you, providing that they are on our conveyancer panel. If you wish to instruct a conveyancer who does not feature on our conveyancer panels, we will instruct a conveyancer from these panels to act on our behalf.
It is important to remember that you will be responsible for all the legal fees and disbursements including the fees of our conveyancer, where you have instructed a different conveyancer to us.
- Foreign currency mortgages
We will not be able to lend to you unless you are resident in the UK and our assessment of your ability to repay the mortgage will only be on income you receive in £’s sterling and assets you hold in £’s sterling.
- Building insurance
As a condition of your mortgage, you must ensure that adequate insurance to cover loss and damage to the property is maintained throughout the mortgage term. You do not need to buy this insurance through Precise Mortgages.
- Payment protection and life insurance
Your mortgage payments are not automatically protected in the event of accident, sickness or unemployment. In view of this, you may wish to consider protecting yourself and your family against the potential loss of your income. If a situation arises where you are unable to work and as such struggle to meet your mortgage repayments, this could lead to the risk of you losing your home. Whilst we appreciate that it is a sensitive topic, you may also wish to consider life insurance to help ensure mortgage repayments in the event of your death.
Your financial adviser may be able to help you arrange payment protection or life insurance but it is not a condition of your mortgage that you have these policies. Please note that we are unable to advise you on the suitability of any arrangements that you may make, whether privately or through your financial adviser.
- What happens if you don’t make your monthly payments
If you experience difficulty meeting your mortgage payments you can contact us by:
- Writing to us at PO Box 6075 Wolverhampton WV10 6TD
- Calling us on 0800 781 8558
We have a team of experienced staff available to provide you with information and support. You can also find useful information on the Money Advice Service website at moneyadviceservice.org.uk or by calling 0300 500 5000. Please click here for further information.
- If you breach the terms of your mortgage (Buy to let)
Where you do not make your monthly payments or breach the terms of your mortgage in any way:
- There may be additional costs for you where we have to carry out further work. Information regarding our fees and charges, and our right to change them can be found in our 'Tariff of mortgage charges' and the 'General Mortgage Conditions' - click here for England and Wales, or here for Scotland.
- Additionally, you will have to pay any costs we pay for insurance and to third parties (e.g. solicitors, asset managers, receivers) that we may instruct to recover any money owed to us or protect our interest in the property.
- We may also pay, on your behalf, any costs and charges associated with the property where you have failed to, and we reasonably consider it necessary to do so to protect our interest in the property. We will add these costs and charges to the amount you owe and which you have to repay to us.
- If you fail to make your monthly payments then this information will be passed to credit reference agencies, which may impact on your ability to take out further loans.
- As a last resort, your property may be repossessed if you do not keep up with payments.
- We may also appoint a ‘receiver’ to collect rent, manage and potentially sell the property. The receiver acts as your agent and therefore we are not legally responsible for their actions.