Remortgages have been high on the agenda this month. Historically, remortgages were a simple transaction to place and process; however, the enquiries we’ve received recently are proving a little more difficult to place and we have been finding ourselves assisting clients who are potential buy-to-let ‘mortgage prisoners’.
In 2016 the increase on stamp duty for second properties was introduced and a surge in investment property purchases occurred before the increase came in to effect. Many of these purchases were completed on 2 year fixed rate products which are now coming to an end.
The main problem we are finding is the fact that in 2017, the rental stresses applied when calculating maximum borrowing available changed under PRA Regulation. Therefore, this means that the mortgage amount granted at outset under past rental calculations may no longer be available when current rental stresses are applied. This of course leaves the client with a shortfall.
In order to combat this problem, and to help our clients, we have had to ‘think outside the box’. This has included utilising products which allow higher borrowing by using the clients income in addition to the rent received. Where clients have no plans to sell the property we will look at the 5 year fixed rate options which allow for a lesser stress; for investors who hold a portfolio, we will look at the entire portfolio to see where changes can be made to cover any shortfalls.
As specialists, we are of course here to help clients who are finding themselves in a position where they feel trapped on high variable rates and feeling they are unable to refinance.
Something to bear in mind for next month is the new EPC regulations which come in to effect on 1st April. Most lenders will require a property to have a minimum EPC rating of A to E. We will definitely be keeping a close eye on valuations and informing clients at the earliest opportunity of the results as lenders may insist on works being completed prior to completion should the rating be above an E.
READ our case study of the month