Categories: Case study | holiday lets

The client in this case had a particularly complex scenario, whereby they needed a multi-unit holiday let mortgage on a house split into two, two bedroomed flats; one was a holiday let and the other was just about to be placed on a long term let, and a one bedroomed holiday let cottage, all on one title.

Holiday let lenders form a smaller number of the overall buy to let mortgage lender space, albeit they have grown in number over the years. However, very few still accept multi-unit property scenarios.

Nonetheless, we were able to find a choice of lenders and get this client a cost effective, like for like remortgage.

The case

Investment route: This investment was made in personal name

The existing portfolio: The client owned two properties, of which this was one, which is split into three units.

The property: The security property was made up of two holiday let flats and one standard buy to let property, which was a fully self-contained annex.

The tenancy arrangement: Not applicable on the holiday lets, Assured Shorthold Tenancy Agreement (AST) on the long-term let.

The borrowing requirement

The client was looking to remortgage with the same borrowing amount. They needed to move away from the existing lender.

Originally all three units had been holiday lets, but the client was changing one to a long-term let, which the existing lender was not comfortable with. The client also wanted to see if a more competitive rate could be found.

The overall objective was for us to find them the lowest overall cost possible from the next mortgage product.

The challenges we overcame

The advisor on the case immediately disregarded many holiday let mortgage lenders. This was because their criteria did not allow a for a multi-unit security property.

Whilst the properties were also listed buildings, this was not obstructive in finding a lender – typically a grade two listing (as was the case here) is accepted by most lenders. A grade one listed can sometimes be harder to find a lender for.

However, the annex, which was on a long-term standard let had a covenant (a legally binding rule placed on a property) over it, stipulating it could not be split from the title of the flats.

This, alongside the multi-unit set-up was the most challenging part of the case. Of the few holiday let lenders who would accept a multi-unit set-up, the majority informed our advisor that the restrictive covenant on the property in combination put the case outside their criteria.

Clients sometimes approach us, fearing a specific issue will cause them to struggle to find a mortgage lender. The most complex cases are typically those where multiple factors in combination make the case harder to find a solution for.

But, this is exactly why we are here. Our process is designed to unveil all these issues as soon as we talk to you, so we can conduct thorough due diligence with lenders.

Happily we were able to identify three lenders the client’s case fit with, and from those we were able to select and present the most cost effective option, which was within the client’s budget.

The solution

Property value: £850,000

Capital raised: £382,769

Loan to value: 45%

Rate: 5.99% five year fixed

Term: 25 years

Payment basis: Interest only

Monthly mortgage payment: £1,953

Monthly rental income: £3,300

Lender arrangement fee: 2.5% of loan amount

Gross yield (before costs): 4.66%

Annual rental income minus mortgage costs: £16,164

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