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Exclusive: Magellan enters complex buy-to-let market with guarantor option

  • 03/09/2018
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Exclusive: Magellan enters complex buy-to-let market with guarantor option
Magellan Homeloans has entered the buy-to-let mortgage market with a proposition including portfolio and limited company offerings, a bespoke interest cover ratio (ICR) calculation and a guarantor option for first-time landlords.


The lender’s move is part of a wider expansion plan which it hopes will see it grow considerably over the next year while expanding its proposition.

It’s buy-to-let product includes support for limited companies as a Special Purpose Vehicle (SPV) and trading, with up to four applicants or shareholders.

There is also a refurbishment option which will allow landlords to access some of the cash used to develop a property once the upgrade has been completed.

Magellan Homeloans managing director Simon Read (pictured) told Specialist Lending Solutions the guarantor option intended to cover two of the main issues facing landlords – lenders’ aversion to first-time or inexperienced investors, and improving tax-efficiency.

“On the residential side guarantors offer advice, support and experience to borrowers so we thought we could use that on buy to let,” he said.

“The other part is landlords will continue to look at ways to maximise tax-efficiency and another way to do that is to use your spouse’s or dependent’s tax positions.

“Being able to transfer properties between spouses without capital gains tax means you can maximise your tax efficiency or you might buy a new property and put it in your spouse’s name, but they might not have that experience,” he added.

Read explained that this was designed to tie-in with the bespoke ICR calculator which starts at 125% and will aggregate the tax rates of all applicants rather than applying the highest rate across the group.

“That’s where this market has got to go – it has got to get cleverer and more professional,” Read continued.


£2m lending limit

Magellan will accept up to £2m or 20 properties per applicant – whichever is lower.

However, it has no limit on the size or value of a portfolio mortgaged with other lenders.

“We need a limit at first to make ourselves comfortable with where we’re at,” Magellan Homeloans managing director Simon Read told Specialist Lending Solutions.

“On properties mortgaged with other lenders, we don’t have a limit on the loan to value (LTV) or property number, but we will of course be ensuring that those portfolios are effectively self-funding as part of the overall applicant review.”

The lender will cater for the increasingly complex market by accepting shared houses, studio flats, new build property, houses of multiple occupation (HMOs), multi-units and property that has recently been, or is intending to be, refurbished by the landlord.

Tenancies considered include Assured Shorthold Tenancies, Common Law tenancies, corporate, students, state-supported and Housing Association tenants.

It added that it had worked hard to keep its application process simple.

“By reducing the need for unnecessary cashflow statements and business plans, as well as only requiring personal guarantees and floating charges in certain circumstances, associated costs should also be lower,” it said.


Prime complex borrowers

Magellan’s buy-to-let product range offers two- and five-year fixed rates plus trackers, the latter attracting no early repayment charges with rates starting from 2.69%.

It is launching with 16 packagers to enable it to monitor feedback before opening out to the whole of the broker market.

Read was positive about the concept of top-slicing, noting that the lender would “definitely be looking at it”, but said this will not be offered it to begin with as he raised concerns that unless done universally lenders could each be claiming the same income.

“We are looking at prime complex borrowers with a couple of little blips which can be accepted on day one, but we won’t be going down the route our residential range does right now,” Read said.

“This is the initial phase. We’ve got some further plans for the product which will come out before the end of the year and it really does depend on how well the products are received by brokers.”


Pipeline for resi and BTL

The buy to let launch is another step in the plans the business has to grow its proposition, especially in the current expanding specialist lending market.

“We’ve got big plans to grow the business and we have a target for market share – our ambition has always been to be one of the go-to lenders in the sectors we operate in,” Read said.

“Between now and Christmas we’ve got big plans in the pipeline on residential and buy to let that we’re excited about and we’re still growing the team here.

“We are always looking for areas of the market where we can add value to intermediaries. Expect to see more holes being filled and more innovation – we’ve got a couple of things in the pipeline that will be a bit different,” he added.




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