The Suffolk Building Society has recently unveiled a new mortgage product designed specifically for private landlords. This focuses on those looking to make ‘light refurbishments’ to their Buy-To-Let (BTL) properties. Whether it’s installing a modern kitchen or updating the bathroom, this new mortgage option is here to facilitate these changes.
How Does the ‘Light Refurb’ Mortgage Work?
The standout feature of the ‘light refurb’ mortgage is its approach to rental calculation. Traditional mortgages base the loan amount on the property’s current rental value. However, the ‘light refurb’ mortgage turns this concept on its head. Instead, the loan amount is based on the estimated future rental income after refurbishments are completed. This innovative approach means landlords could potentially borrow more, based on the anticipated increase in rental value.
To ensure fairness and accuracy, Suffolk Building Society employs third-party valuers. These professionals assess the potential rental income by comparing similar properties in terms of size, location, and condition.
Terms and Requirements for Applicants
Landlords are given a generous six months to complete their refurbishment projects before the property needs to be ready for tenants. During this period, applicants must demonstrate they have sufficient savings to cover the first six months of mortgage repayments, as the property will not generate rental income during renovations.
Required documentation includes detailed plans and costings for the intended refurbishments, plus evidence of available capital to cover the project costs (if not financed by the mortgage itself).
Mortgage Details and Rates
Landlords can choose from three mortgage options:
- Two-Year Discount Deal: Offered at 5.89% (SVR minus 2.80%).
- Two-Year Fixed Deal: Available at 6.14%.
- Five-Year Fixed Deal: Set at 5.79%.
All options feature:
- A maximum Loan-To-Value (LTV) of 80%.
- Loan amounts ranging from £75,000 to £1 million.
- An application fee of £199 and a completion fee of £999.
Eligibility and Restrictions
This mortgage product targets landlords who own up to three buy-to-let properties. A minimum annual income of £25,000 is required. Furthermore, the expected rental income must cover 145% of the monthly mortgage payment, stressed at the Product Rate plus 2.0% or a minimum rate of 5.5%.
Not all properties are eligible. The mortgage is unsuitable for properties that are uninhabitable at the time of purchase, require structural work, or need more than six months of refurbishment.
The Building Society’s Perspective
A spokesperson from the Suffolk Building Society expressed their commitment to supporting non-portfolio landlords. This new mortgage scheme is a step towards improving the condition of private rental housing stock. The Society emphasises its unique approach of manual underwriting, allowing them to consider each application on its own merits.