The Clients: Our clients were two couples, forming four directors of an SPV limited company. While one couple already owned a separate buy to let property, the other two directors were relatively new to landlord life.
The Property: A terraced house on the outskirts of a busy city in the North of England. The property had a good EPC rating of C, making it more energy-efficient and within the new requirements due to come in in 2025.
The Finance: Having recently purchased the property in cash, our clients wanted to continue expanding their portfolio with another investment purchase by capital raising against this existing property.
The Challenge: Typically, lenders will only lend to you once you have been registered as the property owner for at least six months. Lenders enforce this rule to protect themselves from repossessing properties in negative equity, as many did on 90% LTV buy to let properties following the 2008 financial crash. As our clients had only owned the property for five months, most lenders were unwilling to begin the initial remortgage process.
This challenge was increased as our clients wanted to remortgage at the property’s current market value of £125,000, as opposed to its purchase price of £116,000. With lenders already wary of the financial viability of the case, this increase in value price is enough to make risk-averse lenders more dubious.
The Solution: With our whole-of-market access, we quickly identified a lender happy to start the capital raise process before the six-month period had passed and would release the funds after this milestone. By going with this lender, our clients also benefitted from not needing any Directors’ Guarantees, meaning their personal assets are not liable in the unlikely event that they should default on the mortgage. The funding was conditional on the lender knowing the second property purchase details in advance, which caused no real challenge as our clients were able to source a property they wanted to buy. Much to our clients’ delight, there was no application fee and a free valuation! Here are the capital raise details:
Property value: £125,000
Loan amount: £87,500
Rate: 3.19% 5-years fixed
Term: 25 years, interest-only
Mortgage payment: £236 per calendar month
Lender arrangement fee: £1,312
Rental income: £625 per calendar month
8th June 2022