Associated transaction on holiday let by directors of SPV

A broker approached us for help arranging finance for clients who wanted to transfer the ownership of a holiday cottage from their personal names into a newly created SPV limited company.

The clients are business owners in their own right and they also own a number of rental properties.

The property is a 4-bed terrace cottage in Keswick in the heart of the Lake District.

We found a lender that was willing to consider the case. Unfortunately the valuation returned a slightly reduced figure for the property which meant that the maximum loan to value was slightly reduced.

In order to secure the maximum possible LTV we submitted the last two years’ rental income in order that the lender could calculate a new debt service ratio.

The lender accepted the rental income and issued terms at 75% LTV. Here are the details of the deal:

Property value: £350,000

Loan amount: £262,500

Rent: £2,170 pcm

LTV: 75%

Rate: Lender’s LIBOR (0.75%) + 4.85%

Term: 10 years interest only

Monthly mortgage payment: £1,225

Lender arrangement fee: £3,806

Completion date: October 2014

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