Refinance to raise a deposit and new purchase run simultaneously
A legal practitioner approached us looking to refinance her sole rental property. She planned to use the capital raised from the refinance as a deposit on a new buy to let.
The client was looking to refinance a three-bed terraced house in Dartford, whilst simultaneously purchasing a two-bed flat just 15 minutes away.
For the process to run as smoothly as possible, we decide that we would run both the purchase and the remortgage with the same lender.
Before approaching a lender, we asked the client if she had any preference to the type of rate we selected. In response, the client was quite clear in the fact she was only interested in fixing for two years and wanted to borrow in her personal name.
Choosing this type of rate would limit how much the client would be able to borrow. Following guidance from the PRA, this year lenders were required to tighten affordability calculations for buy to let landlords borrowing personally, unless fixing for five years.
The standard RTI calculation for those borrowing personally is now 145% @ 5.5%. Because of this, we knew that the income on the new property would not meet the requirement set by many lenders to achieve the desired loan amount.
We took the case to a high-street bank with whom we have a strong relationship with. After some negotiation and explaining that the client’s generous income would be more than enough to cover the shortfall in rent, an offer was made.
The lender offered the same rate for both the purchase and remortgage, with the added bonus of free legals. The client is due to complete in the next few days, just over a month after making initial contact with us.