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Refinance of ex-Local Authority flat to pay off bank loan

The client is an experienced, full-time property investor who owns more than ten rental properties. In 2013 he purchased a mixed-use building comprising a large, empty retail unit on the ground floor with eight ex-Local Authority flats above. Both the retail unit and the flats required refurbishment which he undertook with a bank loan. On completion of the works he was able to let the retail unit to a local supermarket chain on a long lease.

He also rented out all eight flats then set about refinancing three of them in order to pay off the bank loan. His original broker found a lender for two of the flats but the lender felt that the risk was too high to lend on three. So the investor approached Mortgages for Business for help. The challenge for me was to find a lender that accepted high-rise blocks, ex-Local Authority flats and mixed use buildings. These are factors most mainstream buy to let lenders avoid. However, I took the proposal to a specialist peer-to-peer provider which agreed to lend because:

• The client had a successful track record as a property investor and landlord
• The flat was in a good location, close to transport links
• The flat was generating a healthy rental income

Here are the details of the deal:

Property value: £225,000

Loan amount: £157,500

Loan to value: 70%

Rate: 4.5% loan term tracker

Term: 5 years interest only

Monthly payment: £591

Monthly rental income: £1,200

Annual yield: 6.4%

Lender arrangement fee: 2% of loan amount

Completion date: est. February 2015

Consultant: Jeni Browne, 01732 471647

Consultant

NB: ANY PROPERTY USED AS SECURITY, WHICH MAY INCLUDE YOUR HOME, MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE

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