Raising capital without forfeiting an existing low rate buy to let mortgage

My client is an experienced, self-employed landlord looking to expand his existing portfolio in his sole name by releasing equity in one of his rental properties.

The property he chose was a semi-detached house rented to a family on an AST at £628pcm. Valued at £140k, the property already had a mortgage on it of £91k (65% LTV) at a rate of 0.99%.

Understandably the client was reluctant to refinance away from this great rate, so we suggested a buy to let equity loan which would allow him to raise £28k (20% LTV) and take his total borrowing up to 85% LTV.

The new lender took a second charge to sit behind the existing mortgage. Crucially, with this type of borrowing there are no monthly repayments. Instead, the original loan amount is repaid along with a share of any increase in the value of the property during the life of the loan (subject to a minimum repayment of 2% per annum simple interest). This suited the client as it did not affect his cash flow.

Here are the details of the deal:

Property Value: £140,000

Rental income pcm: £628 pcm

Existing Mortgage: £91,000

Existing rate and term: Bank Rate + 0.99% (currently 1.49%) – 12 years remaining

Existing LTV: 65% LTV

Equity loan amount: 28,000

Equity loan rate: Nil pcm. 40% of any increase in the value of the property during the life of the loan

Term: 12 years to mirror his existing mortgage

Arrangement fee: Nil

Completion date: Est. October 2014

This is just one example of how I've helped a client secure a buy to let mortgage. To see more of my case studies please visit my profile page. And if you have any funding requirements, please do not hesitate to contact me. My direct line and email address can be found below.

6th November 2014