Pink Home Loans has introduced a five-year buy-to-let mortgage that allows up to five properties to be bought within a total advance of £500,000.
The mortgage is available for loans of up to 85 per cent of valuation and is fixed at 6.65 per cent for five years. Borrowers who pay off the mortgage during this period must pay an early redemption penalty and a £100 administration fee. In year one, the penalty amounts to 7 per cent of the amount repaid, reducing to 6 per cent in years two and three, then 5 per cent in years four and five.
Buy-to-let business is booming as those who already invest in stocks and shares are balancing their investment portfolios with one or two properties. Some buy-to-let borrowers raise the deposit for a buy-to-let mortgage by remortgaging the property they live in. However, prospective landlords should not see buy-to-let as a get rich quick scheme because income yields may be low in some parts of the country and a fall in property price could have a negative impact on capital appreciation.
According to Moneyfacts on September 20, 2001, Bristol & West has a more competitive but-to-let deal fixed at 5.95 per cent until October 31, 2006. It also allows up to five properties to be bought within a total advance of £500,000 and has the same early redemption penalty as the Pink Home Loans mortgage. However, the Bristol & West mortgage has a higher arrangement fee at £399, compared to the £299 arrangement fee charged by Pink Home Loans.