Pink Home Loans has introduced a buy-to-let mortgage which has a 0.75 discount until October 31, 2001.
The mortgage has a current payable rate of 5.99 per cent and is available for loans of up to 85 per cent of valuation. Up to five properties can be bought within a total maximum advance of £500,000.
An early redemption penalty is applicable if borrowers pay off the mortgage during the first five years. This reduces from 5 per cent of the amount repaid in years one and two to 4 per cent in years three and four, then 3 per cent in year five.
According to Business Moneyfacts on August 21, 2001, there are three mortgages of this type offering up to 85 per cent of valuation. Exclusive Connections has one, but unlike the Pink mortgage, it has a stepped discount for the first five years. In the first three years, a 1.05 per cent discount is given, which equates to a current payable rate of 5.70 per cent. A lower discount of 0.55 per cent is offered in years four and five.
This means Exclusive Connections is more competitive in terms of interest rate during the first three years than Pink Home Loans, but Pink Home Loans is more competitive in years four and five.
Like Pink Home Loans, it allows up to five properties to be bought within a maximum advance of £500,000 and both deals have a £299 arrangement fee. Borrowers who pay off the Exclusive Connections mortgage in the first five years are subject to the same early redemption penalty as Pink Home Loans.
Some borrowers may prefer the Exclusive Connections mortgage for its bigger discount in the first three years, especially if they are using any spare cash to decorate and maintain their properties. But others may prefer the Pink Home Loans product because the discount does not reduce in the later stages of the discount period.