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guidesHelping clients get finance when they have been struggling for some time, and in this case study that was around a year, is very satisfying, and we also managed to save the client £1500 per month in mortgage costs.
The property was a flat in a block. The landlord wanted to secure a buy to let remortgage, but the complexity of the case meant she was really struggling.
These were the key issues with the set-up of the security property:
- It was in a Rental Guarantee Scheme
- It had been converted into a licensed HMO (House of Multiple Occupation)
- It was in a block with no EWS1 form
When researching your buy to let options, you may not realise certain details about your property or situation will cause you challenges, and sometimes it is not one issue in isolation but a few in combination that can make or break a deal.
What’s more, some brokers won’t have access to all the lenders in the marketplace, which could mean you get turned down for a mortgage with a lender they try, where a specialist broker like us can get you the product you need.
Call our advisors to discuss your mortgage application, we are here to help.
Video guide transcript: Complex buy to let remortgage which saved £1500 per month
“This is a really interesting case that we had from a client. They came to us and they had a flat that was in a rental guarantee scheme.
“So what is a rental guarantee scheme? That's essentially an estate agent, or maybe a housing association, that says, right, we will guarantee you income from a property, and we will gain that income from the tenant directly. There won't be a tenancy agreement between you and the tenant, it will be between the company and the tenant.
“What the company does, what's in it for them, is that they will pass on an amount of the rental income to you and they will take a bit of it as profit for themselves, and that's the business model.
“But, that does present challenges for lenders and lenders are not keen on that scenario. That was one of the key challenges about the property.
“Another challenge to overcome was that the flat was in a block that didn't have what's called an EWS1 form. Now obviously, since the Grenfell tragedy, steps have been taken to ensure that never happens again. And an EWS1 form is a certificate that looks at the cladding on a building, to determine whether it's safe or not.
“Some lenders will lend, where that form and that certification is not in place, but not all of them will. So that was another thing that we had to be aware of and be careful of.
“The other thing that we needed to look at with this property, was that the rental guarantee scheme owners had taken the property, which was a two-bedroom flat, and they converted it into a four bedroom flat and put an HMO licence on it.
“The client had been looking for about a year to try and find a lender that she could remortgage with and was really struggling. It was a big problem and fortunately she came to us.
“We did our investigations. Now like I said, we can find lenders that will accept a flat in a block with no EWS1 form. But what they weren't able to accept is a rental guarantee scheme in place in combination with an HMO (House of Multiple Occupancy) situation.
“The good news was the tenant was close to the end of that rental guarantee scheme. So we gave feedback to her that if she could exit the rental guarantee scheme, don't renew it, get the company to put the property back as it was, as a standard two bedroom buy to let property, then we could get a mortgage for her and she would have to make sure that the HMO licence was no longer in place so that the property was evidently just a standard buy to let property.
“Brilliantly, she was able to do all of those things and the absolute cherry on the cake was that her mortgage payments had been £2,300 and we got that down to £700, which was a saving of 1500 pounds. Who can say better than that? We were really pleased to help that client.
“So, if you're facing any of those sorts of challenges, get in touch with us, we’re Commercial Trust, we're a specialist buy to let broker, and we'd be delighted to help you and get you through any humps in the road that you're facing."