We were approached by a part-time landlord looking to raise finance to expand his buy to let property portfolio.
The client, also a self-employed accountant was hoping to refinance a five-bed detached house in Cheshire.
He had been letting the property to the same family for numerous years and did not want to increase their rental payments, even as the value of the property increased. Because of this, the property was producing a low yield.
Wanting to borrow the maximum possible against the property, we needed to find a lender with a generous rent to interest (RTI) calculation for individual applicants. In January 2017, the PRA tightened affordability calculations for landlords borrowing in their personal name.
We approached a semi-exclusive lender, which can only be accessed via a select panel of mortgage brokers, including Mortgages for Business.
Selecting a five year fixed rate, we were able to secure an RTI calculation of 140% @ 4%, more generous than the standard calculation for individuals at 145% @ 5.5%.
Here are the details of the deal:
Property value: £650,000
Loan amount: £487,500
Rate: 3.75% 5 year fixed
Term: 25 years interest only
RTI calculation: 140% @ 4%
Mortgage payment: £1523 pcm
Original monthly payment: £923 pcm
Lender arrangement fee: 0.5% £2438
Rental income: £2800 pcm
Gross yield: 6.8 % pa
Previous monthly payment: £923
Consultant: Andy McOwat, 01732 471607
24th October 2017