New Build Multi-Unit Refinance to Buy to Let Portfolio Mortgage

The Client: An experienced developer who usually built residential properties and sold them on after. He had no residential buy to let landlord experience

The Properties: Our client had developed a new multi-unit freehold block of six, two-bedroom, self-contained flats. The property was in the South West of England with excellent transport links to local cities.

The Finance: Normally, our client would sell on his completed properties to pay off the development finance and invest the profit into further projects. However, due to the ongoing COVID-19 pandemic, our client had decided to keep the new build multi-unit and rent out the flats. This meant he required a buy to let mortgage to pay off the existing finance and start renting out the properties!

The Challenge: When we initially started working with the client, we approached a lender about the refinance based on a multi-unit buy to let mortgage transaction. However, this returned a disappointing valuation that neither we, nor the client, believed was a true reflection of the value of the property. The valuation returned was for £1 million, which with the maximum 75% LTV buy to let mortgage would only raise our client £750,000. We needed to find a way to achieve a higher valuation which would allow our client to raise additional funds for future investments.

The Solution: Drawing on our extensive buy to let experience, we approached the lender to discuss whether we could refinance that six flats onto a portfolio buy to let mortgage. By doing this, each unit would be valued separately, which would hopefully return a higher total value for our client. Furthermore, placing all six flats on one portfolio buy to let mortgage would reduce administrative costs and time, and meant that our client would still only have one mortgage payment per month, streamlining his cash flow.

Speaking to our long-term contacts with the lender, we put forward our client’s case. Despite his lack of experience as a residential landlord, he had plenty of property know-how, and the high standard of finish on the flats attracted high predicted rents which would happily satisfy buy to let mortgage affordability calculations. The lender was happy to move forward with the portfolio buy to let mortgage, which allowed us to raise an additional £240,000 for our client. Here are the details:

Property Details

Property value: £1.32 million

Loan amount: £990,000

LTV: 75%

Rate: 4.74% five-year fixed

Term: 10 years, interest-only

Mortgage payment: £4,000 per calendar month

Lender arrangement fee: £14,850 (1.5% added to the loan)

Rental income: £5,600 per calendar month

Gross yield: 5.1%

Application: SPV limited company

Consultant: Paul Keddy, 01732 471655

25th November 2020