The Client: An experienced professional landlord with a small portfolio of buy to let properties in the South East of England.
The Property: A one-bedroom flat in a brand-new development, ideally located close to a large town centre and public transport links straight into central London.
The Finance: The client required a 75% LTV buy to let mortgage to purchase the property under his Limited Company.
The Challenge: Two aspects complicated this seemingly straight forward case. Firstly, the client had exchanged on the incomplete new build property in his personal name. After speaking to his accountant, the client decided that purchasing the property under a Ltd Company would be more tax efficient. The issue was, all the paperwork securing the purchase of the property from the developers, including the CML Document, would be in a different name to the name that would ultimately be on the deeds when the sale completed. As a rule, the name(s) on property exchange documents must match the mortgage and completion documents in order to be legal. As it stood, no lender would be able to grant a mortgage offer without suitable changes being made.
To allow the property to complete in a different name to the name on the exchanged papers, in we assisted the client and his solicitor in drawing up a ‘Re-assignment of Lease’ document. The lender accepted this and we were able to proceed with the buy to let mortgage application.
The second challenge we encountered was that while the application was with the lender awaiting the valuation inspection, the UK went into lockdown. With no physical valuations possible, the entire case was on hold.
Fortunately, the client had purchased another flat in the same development just before lockdown and the same lender had been able to complete a physical valuation of the incomplete property before lockdown restrictions came in. Knowing this, we were able to negotiate a desktop valuation for the second property with the lender, helping to move the case forward despite restriction. As the property was a new build, the lender would still need to complete a physical inspection once construction was complete and restrictions allowed, however, the rest of the mortgage could be fully underwritten in the meantime.
As it stands today, the client has a buy to let mortgage offer, subject to the final physical inspection. Being a new-build and therefore uninhabited, we expect the final valuation to be completed quickly once restrictions allow. We are confident that everything will then complete without too much further delay, we’re sure, much to the relief of the client.
Here are the details:
Property value: £236,000
Loan amount: £177,000
Rate: 3.19% 5-year fixed
Term: 25 years, interest-only
Mortgage payment: £479 per calendar month
Lender arrangement fee: 1% (£1,770)
Rental income: £1000 per calendar month
Gross yield: 5% per annum
Application: SPV Ltd Company
Consultant: Rob Gurr, 01732 471673
12th May 2020