We were approached by the directors of a London-based property rental company who wanted to raise capital to expand their business portfolio from four to five properties.
The directors are a father and son team. The father is 72 years old and in addition to being a director of the business he also owns two buy to let properties in his own name – and the son owns five personally.
The property they were looking to refinance is a 3-bed ex-council flat in W2, leased for three years to a housing association, which generates £2,000 pcm in rent.
The challenge for us was to find a lender that would:
• Accept the father as a borrower – most buy to let lenders consider him to be too old!
• Accept an ex-council flat as security
• Allow longer leases to housing associations
This complicated scenario meant that the choice of lender would be somewhat restricted. So we approached one of the new, specialist lenders to the buy to let mortgage market.
It was happy to lend on the flat with the existing lease arrangement but their lending criteria meant that the father would be technically too old at the end of the proposed 10-year mortgage term.
We were able to successfully argue the case because the father had extensive landlord experience, a strong income and the business support of his son.
Consequently, the lender made an exception to its maximum age policy and agreed the following terms.
Property value: £475,000
Loan amount: £356,250
Loan to value: 75%
Rate: 4.59% 5 year fixed
Term: 10 years interest only
Monthly mortgage payment: £1,362
Monthly rental income: £2,000
Annual gross yield: 5.1%
Lender arrangement fee: 2% of loan amount
Consultant: Chris Longhurst
If you would like to know more about age restrictions and buy to let mortgages, read Jeni Browne’s blog on the topic.