The Clients: A married couple who, with 6 buy to lets in the South East of England, were very experienced landlords.
The Property: A 5-bedroom licenced HMO in a residential area of a large town.
The Finance: The clients wanted to remortgage the property and borrow some extra funds to purchase their 7th buy to let for their portfolio.
The Challenge: This case provided plenty of challenges as the couple did not meet the criteria for many lenders.
Firstly, as the wife did all the childcare and did not take an income, their earnings were below £25,000 which is a minimum requirement for many lenders.
Secondly, despite their growing buy to let portfolio, they did not own their own home so this could not be used as security on a mortgage.
Thirdly, the clients wanted an 85% LTV mortgage, of which there are very few on the market.
The main issue, however, was that their portfolio didn’t have a large amount of equity in it; most lenders ask for 25-35% equity in order to mitigate their risk, however, the couples' equity level was just below this threshold.
The Solution: After speaking to the clients and looking at their finances, we were able to put together a case to take to a lender that offered 85% LTV mortgages. We put forward the argument that as the clients had extensive experience as landlords of high yielding HMO properties and a very good credit score, they would not be high risk for the lender. After asking to see 2-years of personal tax returns, in addition to the usual 3 months of bank statements proving their rental income, the lender was happy to accept the application despite the lack of equity in their portfolio. The clients are now in the process of purchasing their 7th buy to let property because of this deal. Here are the details:
Property value: £170,000
Loan amount: £144,500
Rate: 5.29% 5-years fixed
Term: 25-years interest-only
Mortgage payment: £637 per calendar month
Lender arrangement fee: 2% (£2890) added to loan
Rental income: £1900 per calendar month
Application: Personal Name
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14th January 2020