The Client: Despite not having been a landlord for very long, our client had two buy to let properties. They used the rental income to supplement their PAYE income.
The Property: Previously a four-bedroom HMO, our client had recently refurbished the property and added an extra bedroom. The now five-bedroom HMO is in a busy student town in the South of England.
The Finance: Our client was hoping to remortgage this property to a more competitive rate in order to save money on monthly repayments and maximise their profits.
The Challenge: Our client’s level of experience and the use of the property caused us some challenges with this case. Many lenders prefer to see landlords with at least three years’ experience in cases with complex buy to let properties such as HMOs. With just two years under their belt, our client fell just short, which raised concerns with some lenders.
Student homes are typically more likely to put off risk-averse lenders. With an annual turnover of tenants and summer void periods, some lenders don’t include student property in lending criteria.
The impact of these challenges on the case was that we had access to a smaller number of lenders and would have to work hard to convince them of the solidity of the case.
The Solution: Our experience with complex buy to let properties meant we knew what kind of lenders we could approach with this case. It can be a challenge to find a lender happy to offer on HMOs to less experienced clients; however, the lender we approached even accepts HMO applications from first-time landlords. With two years as a student HMO, and its’ prime location in a student town, we were able to give solid proof to our lender of the rental demand for the property. Having presented the case as such, we were able to source our client the competitive rate they desired. Here are the details:
Property value: £430,000
Loan amount: £322,500
Rate: 3.14% fixed for five years
Term: 25 years, capital and interest
Mortgage Payment: £856.62 per calendar month
Lender arrangement fee: 1.5% of the loan amount
Rental income: £3360 per calendar month
Gross yield: 9.3% per annum.
Application: SPV Limited Company
8th April 2022