Purchase of Offshore Trust Owned Buy to Let to UK SPV Limited Company

Purchase of Offshore Trust Owned Buy to Let to UK SPV Limited Company

17.02.21 | Written by: Narinder Gill

The Client: A UK-based portfolio landlord who was a beneficiary of an offshore trust and the director of a newly set-up UK based SPV limited company.

The Properties:
Property One: A four-bedroom semi-detached buy to let house in North London which our client owned via the offshore trust. 

Property Two: A sizeable semi-detached house in a similar area, our client wished to purchase this property and add it to her buy to let portfolio.

Both situated on the very outskirts of North London, the properties have excellent transport links to the city centre. Still, they are far enough out to benefit from fast access to the surrounding countryside. 

The Finance: Following some tax legislation changes, our client's accountant had found that it was no longer cost-effective to run Property One via the offshore trust. Based on the advice, our client wanted to purchase Property One from the offshore trust into her UK limited company. As the current mortgage term (with an offshore lender) was nearly up, it was an opportune time to start the process. As part of the refinance, she also wanted to raise capital from Property One, to form the deposit for Property Two's purchase.

The Challenge: The primary challenge with this case was the offshore element; as our client wanted to use capital from Property One as a deposit for Property Two, we'd need to find a lender that would accept an offshore deposit source. Many lenders are uncomfortable with offshore deposit sources as it makes it more challenging to track the origin of the funds, potentially adding significant risk to the deal. 

As the existing term on Property One was due, our client was keen not to roll onto the more expensive lender standard variable rate. We'd need to seriously consider lender service times to secure one which would reliably meet our deadline. We'd also need both property purchases to complete almost simultaneously to ensure a smooth process for our client. 

Additionally, our client was very upfront about the fact she was also speaking to another mortgage broker about the deal, meaning we were in direct competition for the case!

The Solution: As complex-buy to let mortgage specialists, we are more equipped than some other brokers to deal with complicated limited company structures. With access to the whole of the mortgage market, we were quickly in conversation with a specialist buy to let lender able to accept offshore deposit sources. We promptly secured two competitive limited company buy to let mortgage rates through this lender, meaning the client proceeded with us rather than her other brokerage option. 

Sometimes, further complications arise with buy to let mortgage applications. Almost at the offer stage, the monthly rental valuation for Property Two, while technically enough to cover the mortgage repayments, came back short of what was required to meet the lender's affordability calculations. Utilising our long-term business relationship with the lender, we were able to negotiate that as the rental income from Property One more than covered the mortgage's debt serviceability, some of that additional income could be used to make up the shortfall on Property Two. Disaster avoided, the purchase of both properties proceeded smoothly from there! Here are the details:

Property One

Property value: £800,000

Loan amount: £500,000

LTV: 63%

Rate: 3.35% five-years fixed

Term: 20 years, interest only

Mortgage payment:  £1,455 per calendar month

Lender arrangement fee: 1.25% (£6,250)

Rental income: £3,500 per calendar month

Application: SPV Limited Company

 

Property Two

Property value: £1.1 million

Loan amount: £832,500

LTV: 75%

Rate: 3.55% five-years fixed

Term: 20 years, interest only

Mortgage payment:  £2,493 per calendar month

Lender arrangement fee: 1.25% (£10,406)

Rental income: £3,350 per calendar month

Application: SPV Limited Company

Consultant: Narinder Gill, 01732 471 604

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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