Landlord raises capital with no monthly repayments

We were approached by a longstanding client who was looking to raise capital for further property investment, without disturbing his existing finance. The client has a substantial portfolio which he has built up over the last 15 years.

The client was looking to refinance a 2-bed flat in North London but so as not to disturb the good mortgage rate the client was already paying, we suggested an equity release solution where the repayment amount is linked to the movements in the value of the property.

The solution appealed to the client because there are no monthly payments to reduce his cash flow. Instead, for a loan of 20% LTV (taking his total borrowing on the flat to 60%*), at redemption the client will repay the initial loan plus 40% profit share in the growth of the property’s value.

* This lender will loan up to 20% of the property value on a second charge basis, up to a combined loan to value of 85% LTV, although in our experience, a combined LTV of 75% is more readily achievable.

Here are the details:

Property value: £800,000

Loan amount: £160,000

LTV: 20%

Product: Buy to Let Equity Loan

Term: 5 years

Lender arrangement fee: 2% of loan amount, (£3,200)

Mortgage payment: NIL

Rental income: £2,400 pcm

Gross yield: 3.6% pa

Consultant