Buy to let remortgage of large HMO to raise capital for further purchase

We were approached by a full-time landlord who was looking to raise finance against a six-bed HMO in Milton Keynes.

The funds raised would then be used as a deposit to purchase another HMO property in the same area.

The client was keen for the remortgage to happen quickly, as he wanted his next purchase to complete before April 1st 2016 to avoid paying the 3% stamp duty surcharge.

We needed to find a lender that would:

  • Act quickly, releasing the funds to the client in time for him to purchase his next HMO property

  • Lend on a large HMO – a fewer number of lenders will consider HMOs with 5+ letting rooms

  • Offer a competitive rate that would not increase the client’s monthly repayments too drastically  

Luckily we were able to source finance from a lender that could work to this timescale effectively and offer a competitive rate that only increased the monthly payments by £200.

The deal was offered at the end of January and is due to complete in the first week of March.

The capital raised from the remortgage is being used as the deposit for a purchase, which has run alongside the remortgage application with the same lender.

The client is purchasing the new property – a six-bed HMO located in Milton Keynes – using a newly incorporated SPV limited company. (The remortgaged property is owned by the client personally).

The client has chosen to make all future acquisition using an SPV in light of the pending tax relief changes.

This particular lender is only accessible via Mortgages for Business and a select few other brokers. It can’t be accessed directly via the general public.

Here are the financing details of the remortgage:

Property value: £250,000

Loan amount: £187,500

LTV: 75%

Rate: 4.39% 3 year fixed

Term: 25 years interest only

Mortgage payment: £688 pcm

Lender arrangement fee: 1.5% (£2,813)

Rental income: £2,100 pcm

Gross yield: 10.08% pa


Here are the financing details of the purchase:

Property value: £270,000

Loan amount: £202,000

LTV: 75%

Rate: 4.39% 3 year fixed

Term: 25 years interest only

Mortgage payment: £743

Lender arrangement fee: 1.5% (£3038)

Rental income: £2,300 pcm

Gross yield: 10.22% pa

 

You may also be interested in:

HMOs - What they are and how to finance them? 

Residential Stamp Duty Calculator 

Setting up an SPV Limited Company

Top 10 Buy to Let Remortgage Products

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