Buy to Let Landlord Mortgage Case Studies

Clients were experienced landlords who had developed a portfolio of 40 low value residential investment properties in Wales, with a typical value c £40,000. The portfolio was financed by traditional bank borrowing at 70% loan to property value, on a capital and repayment basis. Rising capital values meant that it was desirable to embark on a significant round of acquisitions but this was hindered by rising values and the need to insert 30% of the purchase price plus costs into the deal.

Mortgages for Business

We were able to organise a refinancing of selected properties at 85% loan to property value to raise £200,000 towards new purchases together with a pre-agreed funding line of £1.8m for new purchases. This has enabled the landlord to acquire in excess of 20 properties in a six month period with speed of response and limited administration, combined with a pre sanctioned limit enabling them to compete equally with cash buyers for well priced properties.

The landlord approached Mortgages for Business with an urgent need to refinance a property within his Buy to Let property portfolio, this need derived from the fact that he was committed to purchasing another property. Therefore from the initial date the enquiry was received the landlord set a maximum transaction timescale of 3 weeks, the date the new property purchase was due to complete.



Mortgages for Business

We considered three key issues when we arranged the finance:

- Ease of administration, which was a key consideration in view of the deadline for completion of the transaction.
- A highly attractive interest rate for the landlord
- No penalties for early redemption at any time, which was an important feature given there was a possibility the client may decide to sell the property in the near future.

We selected a Mortgages for Business rate (Base Rate + 1.75% discounted by 0.65% for 3 years), with a lender we were comfortable could complete the transaction in the required time. Due to the large business volumes we generate we are also given priority service standards by the lenders themselves.

Our administrator worked closely with the landlord, lender and all other relevant parties to ensure the transaction completed in agreed period, all of our mortgage support team have worked for several years within major lenders - and most of them can boast at least 10 years experience in the sector.

Mortgages for Business provided the finance in 2 weeks of the initial enquiry being received and the property transaction completed within the required timescale set by the client.

Mortgages for Business negotiated the following funding for the purchase:

This landlord telephoned us in response to one of our national newspaper advertisements and was seeking a Buy to Let Mortgage on a single high value property (£1,600,000) in Buckinghamshire.

The challenge for MFB was to find a lender prepared to offer finance at this level and at a reasonably high loan to property value. It tends to be the industry norm that the higher the property price the lower the loan to property value the lenders are prepared to offer.




Mortgages for Business

The key issues addressed by the broker were as follows:

- High loan to property value required
- Negotiate the lowest interest rate for the client

Mortgages for Business negotiated the following funding for the purchase:

The landlord, a UK national now permanently resident in the United States was looking to refinance a premier period town house in Londons West End.  The property was let to a city firm and was occupied by a corporate tenant.

The landlord believed the property to be worth approximately £2m.  However this value would need to be confirmed by an independent valuer before financing could begin.

The landlord outlined the following financing stipulations on the property:

• A mortgage of between 75% to 80% of the property value
• A competitive medium term fixed rate to alleviate the clients concerns about the volatility of the interest rates
• The mortgage lender accepted joint applications

Mortgages for Business

The first step for Mortgages for Business was to verify the initial valuation assessment of £2m.  We first short listed the three most appropriate lenders, from this point we then tendered to two valuation companies who we knew had the requisite skills base to provide a valuation that would be acceptable to all three lenders panel.  At this point we discussed the valuation options in detail with the landlord as this was a key success factor in the finance process.

The landlord elected to progress the valuation with the more reputable of the two companies and was delighted following this instruction to be presented with a detailed valuation report indicating an overall value of £2.25m.

Based on this valuation uplift, Mortgages for Business then went about negotiating bespoke market leading mortgage terms with the three lenders selected.  We now took into account the fact the client, due to the higher than originally perceived property valuation, decided to borrow at 75% loan to property value.

Mortgages for Business were able to negotiate the following bespoke Buy to Let finance package with one of the lenders:

The above mortgage offer was provided to the landlord five weeks after the initial enquiry and the monies were drawn down three weeks later.

The landlord, buying as a partnership, had been an established residential property investor a number for years and had built up a substantial portfolio of high value properties in North London.

The landlord brought properties and carried out light refurbishment to them and then let them to professionals working in the city.

However the landlord had been experiencing a number of problems with funding while building the portfolio. 

Firstly with each purchase the client had to go through a three stage funding process:

• Initially a mortgage would be taken out to purchase the property
• Then a development loan to refurbishment the property
• Finally another mortgage after works were completed to remortgage on the enhanced property value to release capital.  This final mortgage released funds for further purchases and refurbishments.

The problem with this three stage process was it was inefficient and incurred numerous new and exit mortgage fees, affecting profit margins.

The second problem experienced was due to rent to interest cover calculation shortfalls, the landlord could only borrow at 60% to 65% loan to property value.  Ideally the landlord wanted to borrow at 85% loan to property value in order to maximise the ability to regear to make further purchases.  The landlord found the only way to raise sufficient capital to expand the portfolio was to sell properties.

The landlord saw a Mortgages for Business advert in the national press and decided to telephone us.

Mortgages for Business

Mortgages for Business have extensive experience of portfolio funding and knew of a number of potential solutions. 

Firstly we negotiated with lenders who we knew had an appetite for this type of business.  Eventually we arranged funding with a lender who calculated rent to interest calculations at the enhanced rent potential after the refurbishment work rather than beforehand, this rental uplift allowed the customer to borrow at 85% loan to property value.

On completion of works the landlord was then able to remortgage on the enhanced property value with the same lender on a no fees basis, on the same headline rate.  As a result of property capital appreciation this released further funds to expand the portfolio.

By pre and post works borrowing at 85% loan to property value the landlord was able to continue expanding their portfolio without the need to sell property. 

Further purchases were also made easier by the fact we arranged a forward buying facility for the client of £2m, with a single page administration process making further purchase borrowing quick and trouble free. 

For further information about your tax obligations as a landlord please visit HM Revenue & Customs Landlord section

Please click for further information on obligations relating Landlord Insurance