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Professional Landlord Purchases Ex-Local Authority Terraced House

Professional Landlord Purchases Ex-Local Authority Terraced House

The ClientAn experienced landlord with a limited company portfolio of five properties in and around a large North-Western city. A professional landlord, rent was our client’s only form of income.

The Property: Located in the city suburbs, the three-bedroom, ex-local authority terraced house is the perfect property for a family with professionals working in the city. By adding this sixth property to his portfolio, our client would significantly boost his income.

The Finance: Wanting to increase his portfolio, our client needed an interest-only, two-year fixed-term buy to let mortgage at 75% LTV to purchase the property. He was using equity released from other investment property as a deposit.

The Challenge: The challenges we encountered were to do with lender criteria. Most high-street lenders would not accept the income via the landlord's portfolio. This is due to the risk factor associated with lending to landlords with no “back-up” income.  If the landlord experienced multiple void periods, it would result in significant income loss and increase the likelihood of mortgage defaults. Consequently, we would need to source a mortgage from the more specialist lenders in the market, potentially increasing available interest rates.

Another challenge we faced was around the property, as some lenders do not accept ex-local authority properties. This is due to concerns about resale in the event of repossession. Although this wouldn’t significantly impact our choice of lenders, we’d need to consider it when sourcing appropriate options for our client.

The Solution: As a specialist buy to let mortgage broker, we have extensive experience sourcing finance for landlords with complex income streams and property criteria. With full market access, we quickly identified the buy to let mortgage lenders with criteria that covered our client's property and income structure. After comparing the mortgage interest rates and products on offer, we secured the most suitable rate, which would increase our client’s cash flow and yield as requested. Here are the details:

Property Details

Property value: £265,000

Loan amount: £198,750

LTV: 75%

Rate: 3.54% 5-year fixed

Term: 25 years, interest-only 

Mortgage payment:  £491 per calendar month

Lender arrangement fee: 1% lender arrangement fee (£1,988)

Rental income: £1,250 per calendar month 

Application: SPV Limited Company

 

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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Mortgages for Business Ltd is authorised and regulated by the Finance Conduct Authority (No. 313537) to transact regulated mortgages. We are a credit broker, not a lender. We work with the whole of market in sourcing a lender for you; we may receive a commission from the lender, and this amount varies between lenders. The FCA does not regulate some investment mortgage contracts. Mortgages for Business Ltd is a founding member of the National Association of Commercial Finance Brokers, the body that promotes best practice within the commercial finance industry. Telephone calls may be monitored or recorded for training purposes.

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