A married couple approached us looking to acquire the leasehold interest of a trading guest house. The pair had no experience in running a guesthouse, but had carried out shifts at a close family member’s hotel on the South Coast.
Both husband and wife are currently unemployed, having spent the last year searching for an appropriate business. Their current income is generated from the rent they receive on their sole rental property.
The couple were looking to purchase the existing trading limited company and associated goodwill by means of a share transfer.
The main challenge with this case was finding a lender which would be willing to lend on a leasehold interest – many lenders will not consider a leasehold, as they have no tangible security in the form of a freehold property.
After explaining the scenario to the couple, they agreed to offer a second charge on their rental property, which would offer the lender full security cover.
We approached a high street bank, who agreed the mortgage and sent out a valuer to take a look at the rental property. Unfortunately, the property was down-valued by £75,000.
Luckily, for the client the lender was still happy to proceed and offered the following terms.
Leasehold purchase price: £450,000
Loan amount: £230,000 – 70% of security value £730,000 – first mortgage(£281,250)
LTV: 70% against the security value
Rate: 6.45% term tracker
Term: 15 years capital and interest with 6 months interest only
Lender arrangement fee: Nil
Mortgage payment: £1,236 for 6 months
Consultant: Andy Elley, 01732 471644
ANY PROPERTY USED AS SECURITY, WHICH MAY INCLUDE YOUR HOME, MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.