Related transaction & interest only term on shop with 3 flats above

We were approached by an existing client who is a full-time landlord with an extensive portfolio of both commercial and residential property in Kent.

On the advice of his accountant, he had been advised to sell a mixed unit which he owns personally to his SPV limited company because it would make better tax sense going forward.

The unit comprises a grocers shop on the ground rented out for £1,100 pcm with three two-bed flats above each rented out for £750pcm. Keen to make the most of the deal, the client also wanted to release some £175k in order to be able to buy more investment property. 

On the face of it, this deal should have been fairly straightforward for a commercial mortgage lender but the client wanted interest only terms which reduced the number of providers we could approach.

After a couple of initial discussions, we selected an intermediary only lender which can only be accessed via few brokers (including Mortgages for Business of course!). The lender was happy to offer the following rate on interest only terms for 10 years which suited the client’s requirements.

Here are the details:

Property value: £500,000

Loan amount: £350,000

LTV: 70%

Rate: 4.9% variable term tracker (LIBOR+4.40%)

Term: 10 years interest only

Lender arrangement fee: 1.5% (£5,250)

Mortgage payment: £1,742 pcm

Rental income: £3,275 pcm

Gross yield: 7.3% pa

Consultant: Chris Longhurst, 01732 471607