Case study: Buy to let remortgage for debt consolidation

We helped a client raise funds from a high-rise ex-local authority flat 

The client in this case had attributes that some lenders can’t accommodate and a property that was highly complex from a criteria-fit perspective. The application was also entered into under tricky circumstances.

First of all the applicant was not a homeowner, they were living with family. Their investment in a rental flat was their only property. It was in a high rise block, had formerly been owned by the local council, opposite a pub above two coffee shops, a restaurant and a gym.

The client needed a buy to let remortgage for debt consolidation, which had arisen as a result of making updates to the property. The tricky part was that the client had mortgaged just a year ago and was still well within their Early Repayment Charge (ERC) period.

It is important for anyone borrowing against property to consolidate debt to be clear that it carries risks:

Think carefully before securing debts against your property. Your property may be repossessed if you do not keep up repayments on your mortgage. By consolidating your debts into a mortgage you may be required to pay more over the entire term than you would with your existing debt.

The challenge

This convoluted case presented many challenges because the property, the client’s property experience and the timing of the borrowing made the overall picture quite unusual.

Key issues included:

• Capital raising for debt consolidation
• High-rise flat
• Ex-local authority property
• Opposite a pub
• Above additional commercial premises 
• Existing lending was within the initial rate period when Early Repayment Charges were applicable

All in all, this was a highly specialist brief for buy to let refinancing. With so many factors at play we had a great deal to do to identify a lender who could help.

Our approach

Typically there are two key ways to raise capital from a property:

1. Remortgage and increase the loan amount you borrow, i.e. a capital-raising buy to let remortgage
2. Take out a second charge against your property

There was a clear flag for us that this immediately fell into the second category, and that was the Early Repayment Charges that would have been payable if the client had exited their existing mortgage so soon after securing it.

As a result, a second charge became the more cost effective option. That brought the lender pool to choose from much smaller. 

In addition to this, we also had to find a lender whose criteria was flexible about the nearby pub, gym and coffee shops, the property type (high rise flat) and the ex-local authority status. Fortunately the property was in London, where some of these factors were not such large hurdles had the property been located elsewhere (they are more common and so do not have such a significant negative impact on the desirability of the property).

The result

The lender we found for this case was able to offer a second charge buy to let mortgage for the property. They took the densely populated location and nearby commercial premises in balance with the fact that the property was in London, where these features are more typical and less of a constraint.

We were able to secure a 70% loan to value product on this particular case, and on second charges in general you can borrow at up to 75%.

Why this matters for landlords and investors

If you are investing in or remortgaging a complex property type, are consolidating debt, or do not own your own home, this does not rule you out from buy to let investing.

We can help with:

• Ex-council properties
• High-rise flats
• Second charge borrowing to avoid paying ERCs
• Debt consolidation

Get specialist help from our expert broker team

Landlord and property investor finance is our specialism. You may have been turned down by a lender, or told you can’t be helped by another broker, but we can often turn a ‘no’ into a ‘yes’

Get in touch, it may take a great deal of stress of your shoulders.