Releasing Equity in a PPR to fund a Buy to Let

[Bronte]

My numbers (in post #1) are correct, my tax liabilities and yields are also understood and correct.

I fully understand the risks involved, and (the information I was particularly looking for) I now know the reasoning behind the banks' apparent reluctance to release equity from a PPR.

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The figures in post 1 don't allow for the fact that the mortgage interest of 75% will be based on both loans. What makes up your annual 7.5K cost and where are you getting the rental figure from. I know rents are extraordinary currently, but eventually they will start building.

What risks do you understand.

 

[Dave_Curry_IMC]

Can you give us a ball park figure on the interest rate options? I presume Pepper are sub prime.

For the scenario outlined in this thread, the rate on the PPR mortgage would be 3.55%, and the BTL rate would be 4.75%. These rates compare very favourably with the competition - the BTL rate is actually the lowest in the market, while the homeloan rate is in the middle ground. By comparison, the BoI rate is 3.90%, and the PTSB rate is 3.70%.

Pepper Homeloans have three main rate categories. The highest rates apply to "near-prime" applications. This is very different to what we would remember by "sub-prime", in that applicants need to have a perfect credit history for at least the last 2 years. At the moment, these rates range from 4.30% to 5.20% for owner-occupier mortgages, and from 5.75% to 6.25% for buy-to-let mortgages. The premium for imperfect credit is therefore around 0.75% to 1.50%.

 

[Bronte]

Would he really get 3.55% on the PPR even though it's really to fund the BTL. Either way the rates are a lot lower than I was expecting. But then again he's looking for less than 50% LTV.

And I think a premium of 1.5% for those with imperfect credit is not bad.

 

[Dave_Curry_IMC]

Would he really get 3.55% on the PPR even though it's really to fund the BTL. Either way the rates are a lot lower than I was expecting. But then again he's looking for less than 50% LTV.

And I think a premium of 1.5% for those with imperfect credit is not bad.

Yes - the rate on the PPR is based purely on the security (PPR) and the LTV band it fits into.