Scarborough Building Society has introduced a two-year discounted rate buy-to-let mortgage that is available for loans of up to 80 per cent of valuation.
The mortgage has a one per cent discount in the first two years, giving a payable rate of 6.20 per cent. Only one property can be bought up to a maximum of £250,000. There is an arrangement fee of £325 and an extended tie-in of one year. This means that borrowers who redeem in the first three years must pay a redemption penalty of two per cent of the sum repaid.
According to Moneyfacts on May 4, 2001, there are three similar mortgages, but the Scarborough Building Society mortgage has the highest interest rate. The lowest interest rate is from The Mortgage Operation. It has a 1.40 per cent discount for the first two years, giving a payable rate of 5.85 per cent. It has the same arrangement fee as the Scarborough Building Society mortgage and is also available for loans of up to 80 per cent of valuation.
Borrowers who redeem The Mortgage Operation mortgage in the first three years must pay six months' interest. With The Mortgage Operation, an unlimited number of properties can be bought within a total advance of £1m, which is more useful for building up a property portfolio than the Scarborough Building Society's mortgage.
According to Bradford & Bingley's Residential Lettings Report for spring 2001, average rental yields vary according to the type of property. The average yield for a four-bedroom detached house is six per cent, compared to eight per cent for a two-bedroom flat.