Family refinances multi-let within 6 months of purchase at increased property value

We were approached by the directors of an SPV limited company who wanted help refinancing a three-bed semi-detached house which they had purchased with a bridging loan just four months previously. In the intervening time they had refurbished the property then let it out to three students.

Keen to repay the bridging loan, the family wanted to refinance the property onto a buy to let mortgage and raise capital to make further investments.

The following circumstances meant that this case could only be financed by a specialist lender:

1. Most lenders will not refinance properties until they have been held for a minimum of six months. Of the few that do, most will not lend against any uplift in the property's value.
2. Let to three, non-related students, the property is classed as a multi-let (also known as a non-licensable HMO) which is outside of borrowing criteria for many mainstream buy to let lenders.
   
   
3. The father will be 79 years old at the end of the mortgage term. Many lenders stipulate a maximum age of 75 years.
   
   
4. The majority of mainstream buy to let lenders only offer personal borrowing; they do not lend to limited companies.

Taking these and the family's other circumstances into account, we determined that Keystone Property Finance was the most appropriate lender for this case because:

• Keystone will lend within six months of purchase against the higher, market value, as long as the loan amount does not exceed the total costs of buying and refurbishing the property in the first place.

• Keystone will lend on HMOs and multi-lets with up to eight bedrooms.

• Keystone does not impose any maximum age restriction on directors of limited companies.

• Keystone will lend to both SPV and trading limited companies as well as individuals.

With our clients' approval, we submitted an application and to the delight of the directors the Keystone underwriters suggested a rate from its Standard Classic Range rather than from its range for HMOs because the property did not require a licence to operate.

Here are the details:

Property Details

Property value: £195,000

Loan amount: £146,250

LTV: 75%

Rate: 3.89% 5 year fixed rate

RTI: 125% @ 4% 

Term: 15 years interest only

Mortgage payment: £483 pcm

Rental income: £1,320 pcm

Lender arrangement fee: 2% (£2,925)

Gross yield: 8.10% pa

Consultant: Gavin Elley, 01625 416398

2nd January 2018