We were approached by a broker whose clients, a couple in their 60s, were looking to raise capital on their investment property to pay off existing debts (credit cards and a personal loan).
The property in question is a purpose built block of six two-bed flats located just outside Bournemouth.
The couple let three of the flats on standard ASTs and the remaining three are operated as short term holiday lets. Over the past couple of years, the couple have spent a considerable sum refurbishing the entire block to a high standard with the original plan being to sell it once the works were completed.
However, having reviewed their finances and investment strategy, they then decided to retain the block and investigate the possibility of extending it either to the side or by adding more storeys at some point in the future.
Obviously this new plan involved further costs including architects drawings and gaining planning permission which, the couple also wanted to pay off with the refinance funds.
We knew that this case would not fit many lenders’ criteria because of the dual nature of the lettings set up (ASTs and short term lets), so we approached a specialist intermediary lender which agreed terms on the understanding that the couple carried out no further development work – the lender did not want the rental income to be jeopardised.
The couple agreed knowing that when they refinance again in three years’ time they can review their plans for development then.
Here are the details of the deal:
Property value: £1,750,000
Loan amount: £330,000
Rate: 4.60% 5 year fixed
Term: 5 years interest only
Borrower: Personal application in joint names
Lender arrangement fee: 1.70% (£5,610)
Mortgage payment: £1,260 pcm
Rental income: £8,416 pcm
Gross yield: 5.8% pa
ANY PROPERTY USED AS SECURITY, WHICH MAY INCLUDE YOUR HOME, MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.