Categories: Case study | buy to let mortgages

We were contacted by a client in a really tight spot. They were approaching the end of their buy to let mortgage term, with only weeks to go. Another broker had missed that the security property was an ex-local authority home, and as such the case had failed to complete with a lender.

We managed to get a mortgage offer on the property in just six days. What’s more, the deal is set to complete within the expiry date of the existing mortgage, saving the client from having to pay it back with their own funds.

The case

Investment route: This investment was made via a Special Purpose Vehicle limited company.

The existing portfolio: The client owned a number of other rental properties.

The property: The security property an ex-local authority three bedroomed flat.

The tenancy arrangement: Standard Assured Shorthold Tenancy Agreement (AST)

The borrowing requirement

The client wanted a like for like loan arranged as soon as possible, he first spoke to us at the beginning of April with a mortgage expiry date in May to complete by. The application was to be made via a Special Purpose Vehicle limited company.

The challenges we overcame

The critical element to this case was without doubt the timeframe within which we needed to complete the deal. A typical buy to let remortgage will take eight to ten weeks, we had five until the client’s existing mortgage would expire.

Nonetheless, the other considerations were that this was a limited company application. The type of property was also more specialist, not only was the flat an ex-local authority property, it was on the fifth floor of a block of flats with what is called in the industry ‘deck-access’.

This is where the front doors of each flat are accessed via an exterior landing running along each floor. Not all lenders will accept this style of property, so we had to find a specialist that would. Similarly, lenders can place limits on the number of floors within a block of flats that they will accept as a security property.

The details surrounding criteria can be more complex than you might expect, which is why our advising team take the time to go through the details of your property and circumstances. As became apparent to this client based on their previous experiences, getting it wrong can cause problems and cost money if a prospective lender conducts and charges for a valuation, only to turn down the case.

The solution

Property value: £420,000

Capital raised: £190,000

Loan to value: 45%

Rate: 5.39% five year fixed

Term: 25 years

Payment basis: Interest only

Monthly mortgage payment: £853

Monthly rental income: £1,650

Lender arrangement fee: Nil

Gross yield (before costs): 4.71%

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