5 year fixed rate obtained using low interest cover ratio

A full-time landlord with a portfolio of 15+ rental properties all held within his SPV Ltd Co, contacted us looking to raise finance against a three-bed semi-detached house located in a Kent seaside town.

The landlord had specific requirements – he needed to raise circa £40,000 to use as the deposit for a further buy to let and had requested a five year fixed rate to protect himself against possible future rate rises.

Unfortunately for the client, the property’s rental income was too low to meet the stress test calculation of the majority of buy to let lender’s five year fixed rates.

To achieve the required £40,000 the client needed a rent to interest (RTI) calculation of 125% at 4.39%.

After searching the market we found a lender with a five year fixed product that would allow the client to release the required amount. The following terms were offered:

Property value: £250,000

Loan amount: £187,500

LTV: 75%

Rate: 4.39% 5 year fixed

Term: 15 years interest only

Borrower: SPV Ltd Co

Lender arrangement fee: 2% (£3,750)

Mortgage payment: £699 pcm

Rental income: £875 pcm

Gross yield: 4.2% pa

Consultant: Paul Martins