The Clients: Two working professionals with a buy to let portfolio in the background. With substantial experience as landlords, our clients were ready to expand their property investment enterprise further.
The Property: An ex-council flat within a seven-storey block in central London. Our clients had owned this property for a while, having lived in it previously themselves.
The Finance: Our clients were looking to remortgage this existing property for two purposes. The first was to remove one client’s mother from the title deeds, and the second was to raise capital for further investment. Our clients planned to put a deposit down on another buy to let investment with the generated funds.
The Challenge: There were a couple of challenges with this case, mainly surrounding the property type, that reduced the number of lenders we could access. Many lenders are wary of flats within high-rise blocks, particularly if the block has a low percentage of privately-owned properties. With just 16% of the block privately owned and as an ex-council flat, many lenders were cautious due to concerns over how this may impact the property’s resale. Should our clients default on the case, lenders want to be certain they will be able to get their money back quickly and easily by selling the property on, which is why they can be more selective over the properties they offer to.
The secondary challenge we faced was that our clients had previously lived in the property. As the clients had not purchased the property intending to let it out, it made the application a Consumer Buy to Let. Not all lenders are happy offering on these applications, as some will be concerned that clients may eventually want to move back into the property. This can make the property finance surrounding the situation more complex and, as such, deter the more risk-averse lenders entirely.
The Solution: With our experience working with complex property types across many buy to let applications, we quickly identified the specialist lenders that would consider offering on this case. Having taken the time to understand our clients’ situation and discuss their needs thoroughly, we approached the lender prepared with all the information they could require. Our clients had not lived in the property since spring 2021, and the lender advised that they would consider the case if the clients had not lived there for a year. As such, they were happy to review the application, and due to a positive valuation, they were happy to offer against the property. Here are the details:
Property value: £405,000
Loan amount: £263,250
Rate: 4.24% five years fixed term
Term: 30 years, interest-only
Mortgage payment: £941.78 per calendar month
Lender arrangement fee: 1.25% of the loan amount (£3,453)
Rental income: £2,250 per calendar month
Gross yield: 6.66% per annum
28th September 2022