High Block Exposure Purchase with Complex Limited Company Structure

High Block Exposure Purchase with Complex Limited Company Structure

09.09.20 | Written by: Agata Rogozinska

The Client: Our client was an experienced property developer who owned a trading company which developed property. The client also held a small buy to let portfolio in his personal name.

The Properties: Our client's trading company had built a two-storey block of six, two-bedroom flats in a popular coastal town in the South of England. Close to plenty of local amenities and the beach, the six modern flats had been finished to a high standard.

The Finance: Our client needed to sell the new flats to pay off his development loan, but he wanted to retain three of the flats for his own buy to let investment. Therefore, he required three limited company buy to let mortgages to move them off of their development finance and keep them within the trading company.

The Challenge: Having consulted a professional tax advisor, our client decided to set up a new SPV limited company, owned by his trading company in 100% shares, with which to purchase the three flats. This unusual structure meant that several lenders who would typically lend to limited companies wouldn't accept the application; due to the complexity of underwriting the subsidiary limited company structure.

The other issue we encountered was that most lenders have a 25% exposure limit per block. As our client was purchasing three of the six properties, we needed to find a lender who would be comfortable with a 50% exposure. The combination of these two challenges meant that we only had a limited number of specialist buy to let lenders whom we could approach with this deal.

The Solution: Using our knowledge of the market, we approached specialist buy to let lenders whom we believed would be more comfortable with the combination of a high block exposure and a subsidiary limited company structure. We outlined the client's situation, evidencing his extensive experience and the high standard of the development. Through our discussions, we secure a lender who accepted the structure and were happy to lend on all three properties. Not only did this mean our client had three premium flats added to his buy to let portfolio, but he'd also raised some of the funds required to pay off his development loan. Here are the details:

Property value: £400,000

Loan amount: £260,000

LTV: 65%

Rate: 3.24% five-year fixed

Term: 25 years, interest only

Mortgage payment:  £ 716 per calendar month

Lender arrangement fee: 2%

Rental income: £1000 per calendar month

Application: SPV Limited Company

Consultant: Agata Rogozinska, 01732 471602 or 07976448467

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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