New innovation to break the 6 month ownership rule and how you can now Remortgage within as soon as the next day.
A “6 Month Ownership Rule” before you can remortgage your buy-to-let is long established as a sound lending practice.
The six month gap was mainly introduced to stop bad practices in the new build sector brought about by the legacy of the infamous “back-to-backs”: where quick remortgages allowed money to be pulled out based on inflated property values; when the reality was underlying asset was worth considerably less second hand. Made all the worse if the development of the surrounding properties stalled or never happened. Lenders basically ended up with little or no equity when they typically seek a comfort of 25% in their stock. To protect themselves a six month breathing space was introduced to allow prices to settle at a realistic level, rather than go by the propertie sold at a premium at the start, and make sure the development was going to be a success.
Where we have found ourselves until now
The stance the buy-to-let remortgage market has adopted for the last few years has driven a divide between Mainstream Lenders and Specialist Lenders. The former with much better pricing sticking rigidly to the 6 months ownership rule.
To justify their higher priced products the Specialist Lenders have dabbled in bringing the 6 months ownership rule forward with a varying degree of restrictions and framework, and all to my knowledge work from the Land Registry date. Their individual rules can include: restricting the value to the original purchase price; only allowing an uplift with the evidence of refurb works; greater tolerance to inherited property and bridge refinances.
New 6 month ownership rule product
From late March 2022 there is a new “Day 1 remortgage solution” that breaks with tradition and is mainly aimed at the professional developers and landlords. You need to have held a buy-to-let for a minimum of 1 year to gain entry to the basic level of products. Beyond that there are much more juicy features for holders of two buy-to-lets for over 2 years such as large HMOs and student lets, foreign nationals, ex pats, with flexibility on property types and short leases.
If you do not have buy-to-let experience you will need to wait until this has built up. For established Landlords read on to discover more about this astounding breaking news…
6 month ownership rule on buy-to-lets re-defined | Much quicker cash-flow
Firstly there is no need to wait for six months’ ownership. In fact there is no need to even wait until your property is being shown as owned on the Land Registry. All you need to produce is Solicitor confirmation that the deeds transfer form TR1 has been submitted to the Land Reg.
The Lender will value the property and advance up to 80% loan-to-value on the current value. There is no reference to the price the property was bought at and no need to justify any spend on any home improvements or refurb work.
This speeds up the process and allows money to be drawn on the new value to use towards the onward project. Importantly no details of what the next project is are needed unlike some lenders who want an address. As they say cash is king.
The Lender is so new to the market that Offers approvals can only happen next month but they are already gathering in applications such is the demand.
I want to be clear here this is a mortgage (terms of up to 40 years) not bridging finance but as an experienced developer you may want to use it along those lines as there are products without early repayment charges within their range.
New 6 month ownership rule criteria summarised:
- One of the Applicants must have owned at least 1 buy-to-let for a year.
- Day 1 remortgage | Property registration just has to be submitted to Land Registry.
- Up to 80% loan-to-value remortgages for any legal purpose.
- No need to provide evidence of works.
- Remortgage to buy onward investment property without project needing to be identified.
- Single unit standard buy-to-lets.
- Multi-unit up to 6 units / HMOs to 6 bedrooms with shared amenities to 65% loan-to-value.
- Personal name or under SPV limited companies.
- Background portfolio stress-tested at 100% coverage.
There are many more features for Applicants with have owned at least 2 buy-to-lets for two years.
Products on the new Six month ownership rule:
As they are so fresh full quotation information is not currently available. I have picked out the 5 year fix and 2 year tracker on standard buy-to-lets as these are likely to be popular. The Lender also offers 2 year and 5 year fixed rates, and separate ranges for multi-let/HMOs and Ex pat/foreign nationals, and “green” good EPC rated properties.
Standard “single unit” Buy-to-lets : 5 Year Fix
| Minimum value in your property | 35% equity | 25% equity | 20% equity |
| Initial rate | 4.05% | 4.10% | 4.15% |
| Subsequent reversionary rate | 5.25% | 5.25% | 5.25% |
| Type and initial benefit period | Fixed rate for 5 years | Fixed rate for 5 years | Fixed rate for 5 years |
| Minimum equity | 40% | 25% | 20% |
| Lender valuation fee | £99 | £99 | £99 |
| Lender booking fee | £149 | £149 | £149 |
| Lender product fee | 1.55% | 1.55% | 1.55% |
| Cashback from the Lender | £Nil | £Nil | £Nil |
| Basic legal costs | Payable | Payable | Payable |
| Early repayment charges | 5/4/3/2/1% | 5/4/3/2/1% | 5/4/3/2/1% |
| Option to hold under SPV Limited Co. | Yes | Yes | Yes |
| Our broker fee charge | From £499 | From £499 | From £499 |
Standard “single unit” Buy-to-lets : Tracker No Early Repayment Charges
| Minimum value in your property | 35% equity | 25% equity | 20% equity |
| Rate | 5.25% (BoE + 4.50%) | 5.25% (BoE + 4.50%) | 5.25% (BoE + 4.50%) |
| Minimum equity | 40% | 25% | 20% |
| Lender valuation fee | £99 | £99 | £99 |
| Lender booking fee | £149 | £149 | £149 |
| Lender product fee | 1.55% | 1.55% | 1.55% |
| Cashback from the Lender | £Nil | £Nil | £Nil |
| Basic legal costs | Payable | Payable | Payable |
| Early repayment charges | £Nil | £Nil | £Nil |
| Option to hold under SPV Limited Co. | Yes | Yes | Yes |
| Our broker fee charge | From £499 | From £499 | From £499 |
If you want to purchase property cash or via bridging finance and want to Remortgage fast without the need of 6 month ownership then please do get in touch.
NOTES
* Rates as at 27/3/2022.
* Figures produced from the Lender’s product guide. Full quotation information is not currently available unless you apply.
* True Cost factors in the interest rate, mortgage set-up costs and any cashback rebates. It assumes the product fee is paid and is no greater than £2,500.
* The comparison is based on an assumed purchase price of £300,000 over a 25 year mortgage term.
* It looks at repayment method of “Interest only” for Buy-to-let.
* Eligibility will depend on your own personal circumstances.
Health Warning
Your Property is at Risk if you do not keep up with your mortgage repayments.
Niche Advice arranges mortgages and is not a Lender.
