A retired couple, landlords with three rental properties approached us looking to transfer the ownership of their rental properties from their personal names into a newly established SPV Ltd Co.
They had been advised to do this by their accountant who had calculated that, in the long run, incorporation would be a more tax efficient way of operating their modest portfolio.
In reality this type of transaction is not a straight “transfer”. In fact the clients must sell each property to the SPV, a process which incurs a variety of costs such as Stamp Duty Land Tax, Capitals Gains Tax, Early Repayment Charges and remortgaging (NB. Not all necessarily apply).
To spread the costs, the couple had decided to sell and refinance one property at a time, the first being a 1-bed flat on the second floor of a purpose built block.
A combination of the following factors meant that the number of suitable lenders would be limited:
- The clients requested a product with no Early Repayment Charges – there are not many of these currently on the market
- The couple are retired and have an annual income of c. £21k – many lenders impose a minimum income of £25k pa
- The vendor and purchaser are related - many lenders steer clear of “related” transactions.
- The rental yield was modest which meant we needed to find a lender with a generous stress test calculation in order to achieve the required loan amount.
After careful consideration, we approached intermediary only lender which can only be accessed by a handful of brokers (including Mortgages for Business of course!).
The lender offered the following terms which were acceptable to the couple and the transaction completed without a hitch.
Property value: £185,000
Loan amount: £134,000
Rate: 3.48% variable
Term: 25 years interest only
Rent to Interest calculation: 125% @ 5%
Mortgage payment: £394 pcm
Lender arrangement fee: 1.5% (£2,010)
Rental income: £700 pcm
Gross yield: 4.5% pa
Consultant: Nick Helm, 01732 471 608
ANY PROPERTY USED AS SECURITY, WHICH MAY INCLUDE YOUR HOME, MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.
This is just one example of how we have helped secure finance for a client, if you have a similar scenario or something you'd like us to look at please get in contact with us on 0345 345 6788 or contact me directly at firstname.lastname@example.org.