The Client: An Edinburgh-based, full-time landlord who owns approximately 20 buy to let properties in Scotland. He approached us for help in remortgaging one which he owns personally as the Early Repayment Charges were about to expire and he wanted to raise some capital to use to add value to his portfolio.
The Property: A licensed, 6-bed HMO in Edinburgh let to students on one AST agreement which generates £3,600 pcm in rent.
The Finance: The client wanted to remortgage up to 75% of the property’s current value. Whilst this is a common procedure, the fact that the property is an HMO and situated in Scotland meant that we would have to seek finance from a specialist lender.
Added to this, the client’s outgoings exceeded what he earned on paper, so we needed a lender which would take his High Net Worth status into account when calculating affordability. (The client had previously worked as a qualified accountant before taking up property investment full-time).
The Solution: We took the deal to one of the challenger banks which regularly lends on these more complex scenarios and accepts HMOs in Scotland. To them, the case was relatively straightforward because we were careful to ensure that all the supporting documentation was present and correct when submitting the application. A formal mortgage offer was issued within a week of application and the mortgage completed five weeks later. Here are the details:
Property value: £530,000
Loan amount: £399,500
Rate: 4.99% fixed for 5 years
Term: 10 years
RTI calculation: 4.99% @ 5.5%
Mortgage payment: £1,659 pcm
Lender arrangement fee: 1% of the loan amount (£3,995)
Rental income: £3,600pcm
Gross yield: 8.2% pa
Consultant: Erin Gallacher, 01625 416392
13th March 2018