Landlord refinances and raises capital on recently converted HMO

We were approached by a broker looking for finance for his client, a full-time landlord with a considerable portfolio consisting of both residential and commercial properties.

The client was looking to remortgage a large house in Greater London which he had recently converted into an HMO with six bedrooms.

The landlord had already let out four of the bedrooms but was holding back on renting out the remaining two because he was waiting for an HMO licence to be issued by the local authority.

He needed to remortgage to repay the original short-term loan and because he wanted to raise finance to make further purchases but the broker was having trouble accessing a lender that would accept this complicated scenario.

The main sticking points with most lenders were the fact that two of the rooms were not let and the HMO licence was not yet granted.

We knew that our lending brand Keystone would be likely to accept the case provided that the landlord could:

  • Demonstrate that the conversion was compliant with planning permission and buildings regulations

  • Provide receipts for the cost of the works

  • Get the HMO licence before the remortgage completed.

After discussing the most suitable option for his circumstances, the client decided to purchase the property personally rather than via a corporate structure.

Here are the details:

Property value: £450,000

Loan amount: £337,500

LTV: 75%

Rate: 4.86% term tracker for individuals

Term: 25 years interest only

Lender arrangement fee: 2% (£6,750)

Monthly payment: £1,366 pcm

Rental income: £3,200 pcm (all rooms let)

Gross yield: 8.5% pa

Consultant: Gareth Richards, 01732 471627