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Buy to Let Purchase for SPV Directors with Complex Income Structures

Buy to Let Purchase for SPV Directors with Complex Income Structures

17.03.20 | Written by: Gareth Richards

The Clients: Two directors of an SPV Limited Company with five existing buy to let properties in the background.

The Property: A three-bedroomed terraced house, not far from the town centre and within commuting distance to London. Initially listed for auction, it had failed to sell on the day so our clients had contacted the vendor independently and come to an arrangement. 

The Finance: Our clients required an interest-only buy to let mortgage to purchase the property.

The Challenge: The vendor, having wanted to sell at auction, was keen for things to move quickly and wanted the purchase completed within three months. 

Typically, auction purchases have a 28-day deadline, which is why investors use bridging finance to secure their investments in time. In this circumstance, however, the client wanted to proceed with a standard buy to let mortgage for the purchase, which would be more challenging to guarantee completion within three months - but not impossible!

The property was vacant at the time of purchase and was going to remain so at the time of completion as our clients wanted to do some light decoration before letting it out. While this was not a huge challenge, it was something we’d need to make the lender aware of and would likely require extra paperwork.

As the client’s SPV already owned five properties, we needed to find a lender who would be comfortable with there being other financial charges on the company. The client had also requested that the lender did not require a debenture to secure the finance.

Our clients were looking for, like many landlords, an interest-only mortgage. While most lenders will consider interest-only terms up to 15 or sometimes 20 years, our clients wanted their mortgage term to be longer and have the option to overpay on the capital.

The clients had diverse personal income streams, including dividends, and one of them was fully self-employed; meaning we needed a lender who would accept this type of income and have no minimum income requirement.

The Solution: After speaking to the clients about their circumstances and requirements, we put together a document highlighting their combined strengths and experience, which we used as a supporting document with their application.

Based on the client’s requirements and the vendor’s time restrictions, we set about researching and shortlisting lenders who, based on our experience as brokers, would be able to meet the deadline as well as provide a suitable product.

After discussions with a small number of potential lenders, we started the application process with one which the clients agreed would be a suitable option. Much to the pleasure of our client, the lender’s criteria accepted those with complex and low-income streams and had no upper limit on the length of term for interest-only mortgages. This meant we could apply for a 30-year term as the clients’ property portfolio was considered an acceptable repayment vehicle.

Because of our client’s landlord experience, the lender was happy to proceed without a debenture on the SPV limited company. As the property was going to be empty upon completion, the lender required examples of Assured Shorthold Tenancy (AST) agreements for the property to be drawn up, illustrating the projected rental income. Satisfied that all the numbers we presented to the lender on the clients’ behalf would work, we were able to secure the purchase of the property and within the three-month deadline set by the vendor. Here are the details:

Property value: £263,000

Loan amount: £184,100

LTV: 70%

Rate: 3.05% 2-year fixed

Term: 30 years, interest-only

Mortgage payment:  £469 per calendar month

Lender arrangement fee: 2% (£3682) added to the loan.

Application: SPV Limited Company

Consultant: Gareth Richards, 01732 471627

ANY PROPERTY USED AS SECURITY, WHICH MAY INCLUDE YOUR HOME, MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.

NB: ANY PROPERTY USED AS SECURITY, WHICH MAY INCLUDE YOUR HOME, MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE

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