Clients: A mother and son who had been appointed trustees of a recently deceased relative’s estate. The mother, who will be the primary mortgage applicant, is an experienced landlord and property developer. The son, (second applicant) is in full-time employment earning less than £25k pa. Both mother and son own their own homes.
Property: A 1-bed flat in a 5-storey block of nine flats in London which had been the home of the deceased relative. The relative had bequeathed the property in trust to five young nieces and nephews; however, the flat was mortgaged and the lender required the loan to be repaid.
The required finance: The trustees decided in order to retain the flat they would need to refinance it, refurbish it then let it out. So, they approached us for help in securing buy to let finance to repay the existing mortgage and raise funds to carry out some refurbishments so that it could achieve a good rental return.
We knew that lending to a trust is quite a specialist area which requires expert knowledge to underwrite. Also, we knew that the personal income streams from both the mother and her son could prove a sticking point. For these reasons, we felt that our best bet would be to approach a specialist, commercial lender rather than a mainstream buy to let provider.
The solution: We talked through the scenario with a couple of lenders and one stood out as being the best possible match. The lender agreed in principle that the deal could work based on the trustees providing personal guarantees, so we submitted a full mortgage application and a valuation of the flat was instructed.
The valuation report confirmed that the flat was good security for the loan. At their request, we provided the lender with the following documentation from the trustees in support of the application:
- The last three years’ SA302s
- Tax overviews for the last two years
- Three months’ bank statements
- Proof of identity and address
- Details of the trust and its beneficiaries
The trustees were delighted to receive a formal mortgage offer just two weeks later. We then worked with our clients, the lender and the solicitors to get deal over the line, and the mortgage completed 40 days later. Here are the details:
Property value: £545,000
Loan amount: £150,000
Rate: 4.20% 5 year fixed
Term: 10 years interest only
Lender arrangement fee: 1.75% added to loan (£2,625)
Mortgage payment: £525 pcm
Rental income (after works): £1,841 pcm
Gross yield: 4.1% pa
Consultant: Adam Henderson, 01732 471658
30th January 2018