The Client: A first-time landlord looking to start their property investment journey in holiday lettings. A booming market, they were confident that this was the right first step into property investment.
The Property: A three-bedroom terraced house built in the 1750s. Situated in a popular coastal town with holiday-goers, and with its distinct character, the property was likely to attract a lot of demand from those looking for their next staycation.
The Finance: Our client sought a 75% LTV holiday let mortgage to purchase the property with their limited company. Holiday lets require specialist mortgage products, which can be more complex to source than standard buy to let finance.
The Challenge: The primary challenge with this case was the deposit source. Our client was using an inter-company loan from a trading company owned in both their name and their wife’s name. This is typically fine; however, differences in the company setups can cause many lenders to be wary of the transaction. The SPV limited company was set up solely in our client’s name, and, as such, lenders were worried about the implication of the deposit only benefitting one of the directors.
Another challenge we faced was that the property had no evidence of successful trading history as a holiday let. Consequently, we had to use rental projections to prove the property could service the loan and demonstrate that its location would generate substantial demand.
The lender raised another query surrounding the building’s materials during the application process. Dating back to the 1750s, the property’s original structure was made purely of rock; however, an extension in the mid-1900s meant the lender was concerned about whether any Mundic block had been used. Mundic block can cause many issues and is deemed unsuitable for building homes, so this threatened to hold up the whole application process and could have left us seeking a new lender altogether.
The Solution: Despite the various challenges with this case, overall, the mortgage process was reasonably straightforward. Our client was extremely patient throughout all the obstacles we faced, and was willing to help in any way possible to mitigate the challenges. The different legal set ups of the limited company and trading company did cause some delays with our specialist lender. However, upon providing the lender with minutes from a meeting with both trading company directors approving the loan, we resolved any concerns over the financing of the deposit.
The property’s prime location in a popular holiday area settled any queries the lender had over evidenced success as a holiday let. We also managed to get the extension tested promptly to check the materials and received confirmation no Mundic block had been used. Despite these delays, both the lender and our client were happy to continue, and a mortgage offer was received. Here are the details:
Property value: £325,000
Loan amount: £243,750
Rate: 3.84% fixed for 2 years
Term: 20 years, interest-only
Mortgage payment: £783 per calendar month
Lender arrangement fee: £999
Rental income: £1,950 per calendar month
Application: SPV Limited Company
7th September 2022