We were approached by a married couple – both in full-time employment. The husband works as an engineer and the wife works in retail.
The pair had purchased the freehold of a block of seven flats in 2013 using expensive short-term finance. At the time of purchasing the block, two of the flats were owned by the occupiers on long leaseholds.
The remaining two flats had now come up for sale. Keen to take ownership of the entire block the couple wished to raise finance to purchase the two remaining leaseholds and to repay the short-term finance which had since rolled over.
As the leaseholder and freeholder can’t be related with most lenders, once the remaining flats had been purchased the couple planned to collapse the leases and own the property on a single freehold split into seven self-contained flats. These would then be rented out to professionals.
A combination of the following factors meant sourcing finance would be a challenge.
- The clients are both classed as inexperienced landlords, with no other investment properties in their portfolio.
- The clients have owned the property for less than three years
- There are over six units within the block
Fortunately, the couple had only requested a low loan to value of 59%, because of this we found a lender which was happy to consider the case as an exception.
The case was referred to the lender’s senior underwriter for sign-off, but happy with the condition of the property and the current valuation the deal went through without a hitch.
Property value: £950,000
Loan amount: £558,250
Rate: 3.54% discounted term tracker
Term: 25 years interest only
Mortgage payment: £1,671 pcm
Original monthly payment (short-term finance): £1,790 pcm
Lender arrangement fee: 1.5% (£2,375)
Rental income: £3,500 pcm
Gross yield: 4.5 % pa
Consultant: Gavin Elley, 01625 416398
ANY PROPERTY USED AS SECURITY, WHICH MAY INCLUDE YOUR HOME, MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.