Scottish landlord with adverse credit purchases 2 adjoining cottages from her Ltd Co

Key points:

  • Self-employed designer and part-time landlord living in Scotland

  • Two adjoining rental cottages both currently owned by her trading limited company

  • On the advice of her accountant she wanted to personally buy the properties from the Ltd Co

  • The client had a messy credit profile with a CCJ following a dispute

  • The rental income did not meet the stress test calculation required by most lenders

Full details:

We were approached by a broker looking to place an associated transaction for his client – a part-time landlord and self-employed designer in Scotland.

For personal reasons the client had been advised to buy her rental properties from her limited company, so that they would be held in her personal name.

The properties in question are two adjoining cottages in a residential street on the outskirts of Glasgow – just 15 minutes from the client’s main residence.

There were four main challenges with this case:

1. The client had been left with a messy credit profile after a dispute with a business creditor

2. A lot of lenders will not accept adjoining property on separate titles

3. This type of deal is classed as an associated transaction, not something accepted by all lenders

4. The rental income was insufficient to meet the standard income cover ratio of most lenders

Fortunately Keystone Property Finance was able to assist with a product from its Solutions Range. It accepts both minor adverse credit and associated transactions, which ticked off two of the challenges.

It was also happy with the returned valuation report which meant it deemed the property a good risk, so allowed the client to use some of her excess income from her business to make up the rent shortfall.

Here are the details of the deal:

Property value: £100,000 each property

Loan amount: £75,000 each property

LTV: 75%

Rate: 7.99% 3 year fixed for individuals

Term: 3 years interest only

Borrower: Personal name

Lender arrangement fee: 3% (£2,240 each)

Mortgage payment: £497 pcm each

Rental income: £500 pcm each

Gross yield: 6% pa

Consultant: Julie Priest

Consultant