We were approached by a project manager working in the construction industry who was looking to get on the property ladder by purchasing a 2-bed flat in a converted terrace house in South East London for £331,000, using a deposit gifted to him by his father.
The flat was already tenanted and generating a rent of £1,550 pcm, and was being sold by probate as the owner had died.
The number of lenders that will consider applicants who are first-time buyers and first time landlords is limited so we approached a high street bank that is well-known for this type of transaction. In these cases, the bank calculates affordability as though the applicant were applying for a homebuyer mortgage rather than using a rental stress test.
Unfortunately for our client, his salary was insufficient. However, the client reliably informed us that he was due a substantial pay rise (£10k), so we asked his employer to confirm this in writing.
Having received the necessary confirmation, we submitted an application to the lender requesting a fast turnaround time as required by the probate situation. A valuation was booked and when the report came back, it suggested that the property was worth £375,000 – a whopping £44,000 more than the purchase price.
Whilst this was good news for our client, the bank was only willing to lend against the purchase price of £331,000 but did produce the formal mortgage offer within 17 days.
Here are the details of the deal:
Property price: £331,000
Loan amount: £248,250
Rate: 2.50% 2 year tracker
Term: 25years capital & interest
Mortgage payment: £519.00 pcm
Lender arrangement fee: £995 added to the loan
Rent: £1,550 pcm
Gross yield: 5.6% pa
Consultant: Gavin Richardson, 01732 471613