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Capital Raise with Successful Rental Valuation Challenge

Capital Raise with Successful Rental Valuation Challenge

The Client: An experienced landlord looking to expand her property investment portfolio.

The Property: A three-bedroom mid-terraced house that our client already owned. Situated in a quiet, residential town in the southeast of England, the property maintained a high rental demand.

The Finance: Looking to capital raise against this existing property, our client intended to use the funds generated as a 25% deposit towards a new property for her portfolio.

 The Challenge: Our client already received £1,200 per calendar month from the property, and needed this level of rental income to maximise the deposit for her next investment. However, we faced a substantial challenge when the rental valuation for the property came back at just £950 per calendar month, limiting the loan amount significantly to lower than she needed. This meant we would need to appeal the valuer’s decision in order to meet our client’s demands, which can be particularly difficult. If our client couldn’t raise the full deposit amount, she’d have to start her search for a new BTL property again with a smaller budget; something she didn’t want to do.

The Solution: Our experience in the buy to let market meant we knew how best to approach rental valuation difficulties. As there were no issues with the property valuation, we quickly identified that the way to overcome this challenge was to justify to the lender the rent our client was charging. It’s important to note that appealing any type of valuation can be time-consuming, and in the vast majority of cases, they are unsuccessful. Just as in this exceptional case, it was our client’s responsibility to research and source three examples of identical properties within a ½ mile radius that had been rented out in the last six months. Fortuantely, in this case, the report was amended by the valuer to our initial rental price. Our client was therefore eligible for her desired loan amount, and was happy to proceed. Here are the details:

Property Details

Property value: £275,000

Loan amount: £206,250

LTV: 75%

Rate: 2.59% 5-years fixed term

Term: 25 years, interest-only

Mortgage payment: £445.16 per calendar month

Lender arrangement fee: Free

Rental income: £1,200 per calendar month

Gross yield: 5.23% per annum

Application: Individual 

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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