The Client: A homeowner was looking to purchase a new family home while retaining his existing property as a buy to let. A first-time landlord, he's sought professional tax advice to determine how best to complete this transaction before coming to us.
The Property: A three-bedroom semi-detached family home located in a popular commuter area of Surrey. With plenty of transport options, it's well-positioned for anyone commuting to the surrounding towns or Central London.
The Finance: As our client's new home would be more expensive than his existing property, it was more tax-efficient to purchase the current property into a new SPV limited company. While he'd pay the 3% stamp duty surcharge on the existing property, this would be cheaper than paying the additional 3% on the new, higher-value property. Therefore, our client required a 75% LTV limited company buy to let mortgage, using some equity within the property as a deposit via a director's loan. Furthermore, in order to increase the deposit for his new home, he needed to release some additional funds through capital raise at the same time.
The Challenge: The case had multiple elements restricting how many and which buy to let lenders we could approach for finance. Being a first-time landlord would preclude our client from a few that require previous landlord experience. However, the more complex let to buy aspect, combined with a capital raise, restricted our options the most, as many lenders don't accept these more complicated and regulated applications.
In addition, our client wished to complete the transactions before the June 2021 stamp duty deadline to make the most of the tax savings on offer. We'd need to ensure the lender used could meet this deadline!
The Solution: With intricate cases such as this, having access to as many buy to let lenders as possible is essential if you want to save time and money. As a specialist buy to let broker, we're accustomed to dealing with both first-time landlords and let to buy transactions and use our experience to seek out the most competitive mortgage rates from the most suitable lenders.
After comparing the lender options, it was clear which one had the most competitive buy to let mortgage offering for our client. When submitting the application, we made sure the lender was aware our client needed to complete before the stamp duty holiday deadline and worked with them to ensure a smooth process and meet the deadline. Our client is now a buy to let landlord and the owner of a brand-new home! Here are the details:
Property value: £440,000
Loan amount: £330,000
Rate: 3.39% five-year fixed
Term: 25 years, interest-only
Mortgage payment: £943.61 per calendar month
Lender arrangement fee: £3,995 added to the loan
Rental income: £1,500 per calendar month
Gross yield: 4.09%
Application: SPV Limited Company
Consultant: Erin Gallacher, 01625 416392
7th July 2021