The Clients: Two directors of an established SPV Limited Company. With 18 properties in their Limited Company, our clients were ready to fund further purchases into their property investment portfolio.
The Property: A six-bedroom property on the outskirts of Manchester. The prime location of this fully-licenced HMO ensured our clients would always have significant demand from prospective tenants.
The Finance: Having purchased the six-bedroom property for cash only the month before, our clients wanted to start the refinancing process to raise sufficient capital to fund further investments.
The Challenge: The primary challenge with this case was finding a lender happy to allow this day-one remortgage. Lenders classify a ‘day-one remortgage’ as a remortgage of a property within the first six months of legal ownership. Typically, lenders will prefer clients to have owned the property for more than six months before allowing further transactions. The main challenge for this case was that our client was applying for new property finance just one month after the completed purchase, and the Land Registry didn’t yet show the client’s name.
A further challenge was that lenders typically only lend on the purchase price instead of the property’s market value in the first six months. This could restrict the amount of equity our client could raise from the property, which would impact the follow-on property purchase.
A final challenge was that, despite the property being a fully-licenced HMO, the client still needed to receive the correct HMO licence in his name for the property. As such, many aspects of this case threatened to delay the mortgage process significantly.
The Solution: Overall, the biggest challenge with this case was the timings surrounding the completed purchase and the early remortgage. Our experience working on these day-one remortgage applications meant we understood what lenders would look for to provide an offer.
As such, we worked closely with our clients’ solicitor to provide the lender with the official copy of the register of title as soon as possible to speed up the application process. Furthermore, we also supplied the lender with sufficient evidence that the clients’ application for the HMO licence had been submitted.
Finally, we were able to source our clients a deal that allowed them to borrow the desired loan amount based on the purchase price. Our expertise in the buy to let space means we understand how complex lender rent-to-interest (RTI) calculations work, and were able to find a deal that worked best for our clients.
With the correct documentation supplied to the lender, we pushed this case through, taking just seven weeks from application to completion.
As for our clients’ plans following this capital raise, the lender was happy to complete the transaction without needing the onward purchase details. Our clients now have the cash readily available for when they find the right property to purchase into their portfolio, and we look forward to working with them again on this transaction.
Here are the remortgage details:
Property value: £290,000
Loan amount: £217,500
Rate: 5.33%, five-year fixed*
Term: 25 years, interest-only
Mortgage payment: £985 per calendar month
Lender arrangement fee: 2% (£4,350)
Rental income: £3,100 per calendar month
Application: SPV Limited Company
*Rate as at May 2023 and subject to change.
12th July 2023