4.00% pay rate limited company lifetime tracker
- Published: Wednesday 07 December, 2016
- Category: BTL mortgages
- By: Matthew Bone
- Updated: Wednesday 21 December, 2016
One of our specialist lenders has announced three new 65% LTV limited company products, the standout deal being a 4.00% pay rate lifetime tracker. This deal will be of particular interest to those landlords turning to limited company investment ahead of the upcoming tax relief withdrawal.
Alongside the lifetime tracker are a 2 year fixed rate and a 5 year fixed deals, at 3.40% and 3.79% respectively, and are suited to landlords looking for stability in their mortgage repayments.
What is a tracker mortgage?
Tracker rate deals are commonly linked either to the Bank of England Base Rate (BBR) or, in case of this deal, The London Interbank Offered Rate (LIBOR). This deal is set up to track the LIBOR for the entire term of the deal.
The repayment amount on a tracker mortgage varies according to the performance of the rate it is tracking. This means you benefit from lower payments when the rate is low, but will see your repayments rise if the rate goes up.
YOUR PROPERTY MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON A MORTGAGE OR ANY OTHER DEBT SECURED ON IT.
*LTV = Loan to value
**ERC = Early Repayment Charge
Why are landlords turning to limited company investment?
Property investment via a limited company is becoming ever more popular in the buy to let mortgage industry because tax relief is being withdrawn, for individuals. This means individual landlords will pay an increasing amount of tax on rental income from the new year.
Limited companies are subject to corporation tax and not income tax, so are not affected by this change, and may offer investors more favourable tax scenarios. For more on this read our article “Pros and cons of buy to let through a limited company”.
What is exceptional about these products?
The affordability calculation for the lifetime tracker deal, based on the actual rate of the deal of 4.00% and just 125% rental coverage, is especially striking.
Other recent changes (from the PRA) for individual landlords have seen lots of lenders implement affordability calculations based on a rate of 5.5% and a rental cover ratio of 145% which restricts the size of loan available to them.
With the 2 and 5 year fixed rate products, the affordability on these are calculated at 125% rental cover and 5% rate, which still allows you favourable upper loan limits whilst also offering the stability of knowing what your monthly mortgage repayment will be during the initial period.
You must have an SPV set up
The products above are for Special Purpose Vehicle (SPV) limited companies only. An SPV exists only for the purchase of property and related business, such as management and future selling. Any company dealing in other business avenues, will not be eligible.
Visit our article on setting up an SPV.
Mortgage criteria summary
- Available for purchase or remortgage
- Properties in England and Wales
- Limited company investors only
- Limited company must be an SPV (with Standard Industry Codes/’SIC’: 68100, 68209, 68320, 68201)
- Primary applicant minimum income £25,000 pa
- Applicants must be UK residents
- Not available for expats
- Not available for HMOs (Houses of Multiple Occupation) or MUBs (Multi Unit Blocks)
For full mortgage criteria and to discuss your eligibility, please get in touch.
This information should not be interpreted as financial advice. Mortgage and loan rates are subject to change.