New mortgage stress tests
We have 3 buy to let mortgages about to finish their 2-year discounted rates and revert back to the standard variable rate which will make them uneconomical - i.e. the monthly mortgage interest payments would be the same as the rent.
We've been successfully re-mortgaging these properties every 2-3 years for some time but now it seems that the banks have brought out a new stress test which makes it very difficult to get them to lend on the same properties.
What used to happen was as long as the rent was 125% or more of the mortgage repayments, you were ok. Now, you need to be getting 145% of 5.5% of your outstanding mortgage (even though the rate you are paying would be around 2%). We can only get what the market rent is for the properties but these new stress tests would make it impossible for us to re-mortgage because the rent they need to see would be around 1/3 more than is possible to get.
So far the only solution would be to sell the properties if we can't get re-mortgage them.
Has anyone else come up with this problem and found a solution?
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