The Clients: the principal client was an experienced commercial landlord who also owned and ran several trading companies. The company, which owned the property in question, had been trading for five years and consisted of two directors (including the principal client) and a few overseas shareholders. Both directors of the company would be named on the mortgage application.
The Property: the clients owned a large, three-story office block, from which they ran multiple businesses and also sublet the additional office spaces, providing a steady rental income. The property also included a yard, which was leased to a tenant storing large vehicles and provided over £100,000 in additional rental income for our client.
The Finance: the clients were looking to remortgage to capital raise for two reasons: the first being to pay off a £345,000 business loan and secondly to raise £1 million for future commercial investments.
The Challenge: although the clients wanted to capital raise for future investments, they were yet to have a purchase lined up, meaning they were unable to prove to a lender how they would use the money. Even some of the more specialist commercial lenders require an intended purchase to accept an application (especially for a loan of this size), immediately limiting us to less than ten lenders.
Usually, with a commercial mortgage, the lender providing the funds would insist that the business banking also be done with them. One of our clients’ primary requirements was that he could keep his business banking with his existing bank, to avoid the disruption a change would cause for his companies. This requirement meant that we had to find a lender who would allow our client to stay with his existing bank, despite having a mortgage with them.
The final hurdle we faced was that the two directors applying for the mortgage were in their mid-60s, and the clients were looking for a 20-year term on the finance; meaning we would need to find a lender who accepts older borrowers. Once again, the number of lenders that will take borrowers up to the age of 80-85 during the term of a mortgage is limited, so it would be a challenge to find a suitable lender which could accommodate all these requirements.
The Solution: to secure a lender for this finance, we would need to put together a case highlighting the strengths of the clients to demonstrate that they would not be a risk. Having spoken to the clients about their experience in business and as a landlord, we asked for:
- Two years-worth of audited or certified accounts of all the clients’ businesses
- Three to six months of bank statements for both the applicants and the businesses
- Copies of existing leases
We were able to take this information to the few lenders we believed would accept this application and have conversations with them about the specifics of the clients’ mortgage requirements. From there, we settled on a lender that would: approve borrowers up to the age of 85, didn’t require the client to move their business banking with them, and that was happy to lend despite the client not having a commercial purchase in line at the time. The lender also didn’t need the shareholders to be involved, other than to provide ID to complete money laundering checks, making the process much easier for the client. Here are the details:
Property value: £2,330,000
Loan amount: £1,345,000
Rate: Variable BBR + 3.50%
Term: 20-years, capital & interest
Mortgage payment: £8,303 per calendar month
Lender arrangement fee: 1.5% added to loan (£17,175)
Rental income: £123,674 per annum (£10,306 per calendar month)
Application: Trading Ltd Co
Consultant: Peter Barnes, 01732 471641
10th March 2020