Three brothers, all experienced landlords, contacted us looking to remortgage a rental property they had bought for cash via their SPV limited company just over four months ago (March 2016).
The property in question is a two-storey terraced house in a popular student area of Liverpool. The brothers were renting the four bedrooms out to students separately to maximise their returns but on a single AST. Some lenders view this arrangement as a multi-let, others class it as an HMO regardless of whether or not a licence is required by the local authority.
In this instance, an HMO licence was not required.
The brothers wanted to refinance the property at open market value to raise capital for a future purchase. There were two main problems with this.
- Many lenders will not consider remortgaging properties owned for under six months
- Those lenders that will consider this tend to base their lending on the original purchase price or purchase price plus the cost of any refurbishment works, not on open market value (OMV)
These issues meant that the choice of lender was potentially restricted. However, we approached a specialist provider, which agreed that the mortgage application could be submitted immediately and the loan would be calculated using the OMV on the basis that completion would take place after the six-month ownership mark.
The fact that this lender also viewed the property as multi-let rather than an HMO meant that the brothers were offered a lower rate.
Here are the details of the deal:
Property value: £95,000
Loan amount: £71,250
Rate: 4.29% 3 year fixed
Term: 25 years interest only
Borrower: SPV Ltd Co (3 directors on application form)
Lender arrangement fee: 2% (£1,425)
Mortgage payment: £255 pcm
Rental income: £1,013 pcm
Gross yield: 12.8% pa
Consultant: Charlie London, 01732 471604