We were approached two married couples who are the directors of a newly established SPV limited company. Two of the directors are self-employed, and two are in full-time employment, one of whom earns a very high salary. They were looking to raise capital against a 4-bed house in Oxford which they own outright.
The property, which they acquired in early 2016 as their first rental property/development project, has been completely refurbished and is now worth 40% more than the purchase price. The funds raised would be used to replenish working capital and expand their portfolio.
The clients specifically requested a two year fixed rate on interest only terms. The large loan amount meant that we were somewhat restricted in the choice of lenders because many will not lend above £500k.
As with all applications by newly established SPV limited companies, the deal was underwritten based on the income and personal guarantees of the directors rather than on the record of the company.
The clients opted for a lender offering extremely favourable rates. A valuation of the property was instructed within 24 hours and the follow terms were offered.
Property value: £1,050,000
Loan amount: £650,000
Rate: 3.40% 2 year fixed
Term: 20 years interest only
RTI: 125% @ 5.5%
Borrower: SPV Ltd Co
Lender arrangement fee: 1.5% (£9,750)
Mortgage payment: £1,869 pcm
Rental income: £3,750 pcm
Gross yield: 4.3% pa
Consultant: Gavin Richardson, 01732 471613
28th February 2017