The client is an engineering consultant from Essex. He owns his own home but has no experience as a landlord. He recently set up a SPV limited company with the intention of using it to purchase a property to let. He was hoping to purchase a new-build, 2-bed flat in a seven storey bock in a prestigious riverside location.
Finding a suitable lender would be a challenge for five reasons:
1. The client only had one year’s trading accounts – most lenders require 2-3 years
2. He wanted to purchase using an SPV limited company – only a handful of lenders accept this type of transaction
3. The flat was a new-build – lots of lenders won’t accept new-build flats
4. The flat was in a seven storey block – most lenders prefer fewer than five storeys
5. The block was potentially in a high flood risk area
We found a specialist buy to let lender that was willing to consider the deal. Before the formal application was submitted the lender asked its surveyor to carry out some initial background checks on the property to ascertain its potential risk. The surveyor reported that the block was not located in a designated flood risk area and in fact, the location was highly desirable with a strong potential for renting to professionals.
Accordingly, we helped the client to put together and submit the formal application. The surveyor was instructed to assess and value the property and reported that it represented a good risk. This report enabled the lender to waive its usual four-storey restriction and agreed to lend. Here are the details of the deal:
Property value: £156,500
Loan amount: £117,375
Loan to value: 75%
Rate: 3.75% 2 year fixed
Term: 20 years interest only
Monthly mortgage payment: £366.80
Monthly rental income: £800
Annual gross yield: 6.13%
Lender arrangement fee: 2%
Consultant: Jeni Browne
