Secured Loans

[liller]

I am looking to raise a loan against a BTL property, does anyone have any experience of doing this? Or is there any lenders/brokers that I should consider going to for advice?

Thanks in advance.

[Sarnie]

Do you actually mean a secured loan or a mortgage?

Do you have a mortgage secured against it already?

If so, whats the current LTV?

How much are you wanting to raise and for what purpose?

[liller]

Hi, I mean a secured loan, we already have a mortgage against the property but we are looking to raise some cash against it to fund another property.

Mortgage is approx £280k and current market value is approx £450k. Looking to raise £50k.

[Sarnie]

liller said:

Hi, I mean a secured loan, we already have a mortgage against the property but we are looking to raise some cash against it to fund another property.

Mortgage is approx £280k and current market value is approx £450k. Looking to raise £50k.

It can be done but secured loans will be an expensive way of lending the money.

Have you approached your current lender?

Are you currently tied into a product with them?

[liller]

We have but they won't lend us the full amount plus, we want to retain our current product as it's great value! I get the feeling that they aren't being too helpful as they would rather we switched products. Trying to see what are other options are before looking at re-mortgaging with another lender.

[Sarnie]

liller said:

We have but they won't lend us the full amount plus, we want to retain our current product as it's great value! I get the feeling that they aren't being too helpful as they would rather we switched products. Trying to see what are other options are before looking at re-mortgaging with another lender.

How long are you tied in to your current rate?

What rate is it?

How much rent do you receive?

[liller]

Sarnie said:

How long are you tied in to your current rate?

What rate is it?

How much rent do you receive?

We're not tied in at all and are currently on a libor tracker so our repayments are very low hence the desire to retain it if possible! Getting £1600pcm at the moment.

[Sarnie]

liller said:

We're not tied in at all and are currently on a libor tracker so our repayments are very low hence the desire to retain it if possible! Getting £1600pcm at the moment.

Do you know exactly what rate you are on?

If you are not tied in then I can't see a secured loan in addition to the current rate being cheaper than remortgaging to get the whole lot under one rate.

Why your current lender refuse to lend the full amount? Was it because your rent was insufficient?

Most lenders will assess BTL's like this;

£330,000 x 5% (stress rate used by lenders) = £16,500 annual interest

£16,500 / 12 = £1,375 monthly interest.

£1,375 x 125% = £1,718 minimum rent required......

Working that formula backwards, the maximum lend with most lenders would be circa £307k.

There are a few lenders who will use the pay rate rather the 5% stress rate though, but not many.....

[liller]

Not sure of the exact rate, it's pegged to the libor rate, that's all I know with out checking the docs. Perhaps a remortgage would be better, just thought it'd be more of a hassle though. Are there any good btl deals out there though?

[Sarnie]

liller said:

Not sure of the exact rate, it's pegged to the libor rate, that's all I know with out checking the docs. Perhaps a remortgage would be better, just thought it'd be more of a hassle though. Are there any good btl deals out there though?

Yes, lots of good deals out there, if you aren't tied in to your current product then it would seem to be the best way of doing it, depending on what sort of a product you are currently on.

Secured loan lending isn't cheap, I recently sourced some similar figures for another client and the best figures that came back for £50k was;

Advance amount £50,000
Broker Fee £3,995 (not our Broker fee by the way!)
Lender Fee £995
TT fee £35

TOTAL LOAN £55,025

Monthly repayment £398.22 over 23 years.......
Total repayable £109,908.72
APR: 8.30%


Thats why, based on the above, I can't see that it wouldn't be better to remortgage the whole amount onto a rate of circa 3%, details dependant.....

Edited by Sarnie on Friday 9th May 15:33

[liller]

When you break it down like that secured lending doesn't look like good value! I think I'm going to check out the remortgage route. Thanks for your advice so far, really appreciated.