Commercial mortgage for landlords purchasing sandwich shop at auction

The clients: Father and son both of whom are the directors of an SPV Ltd company. Between them, they own 21 properties rental properties – 16 buy to lets and five of which are commercial.

The property: A retail unit on a busy shopping street in Croydon - currently leased out and being run as an independent sandwich shop. With the tenants already signed up for a further year, both father and son saw this as a good investment and were hoping to secure the winning bid at auction.

The finance: If the auction guide price was accurate, the pair were looking to borrow in the region of £100k. They had enough for a cash deposit of 10-30% if successful on the day.
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The application process: After an initial discussion with the clients, we felt that a term mortgage would be a more appropriate and cost-effective route for their circumstances. With our clients’ agreement we approached a commercial mortgage lender for an decision in principle and an undertaking that they would be able to process an application within 28 days.

Happy that with the clients’ profile and borrowing requirements, the AIP was granted just 24 hours later. It was then a waiting game until auction day!

To the delight of our clients, they won the bid and rang us immediately to let us know so that we could get straight to work on submitting a full mortgage application. We then worked hard to ensure that all parties kept their part of the process on track. Within two weeks, the case completed and the funds were transferred before the 28-day deadline. Here are the details of the deal:

Property Details

Property value: £143,000

Loan amount: £100,000

LTV: 70%

Rate: 3.39% + Bank Rate

Term: 25 years interest only

Mortgage payment: £332 pcm

Lender arrangement fee: £1,500 (1.5% of loan amount) added to the loan amount

Rental income: £833 pcm

Gross yield: 6.9% pa

31st July 2018