The Clients: A pair of experienced landlords with three residential buy to let properties and one semi-commercial premise, all owned under their personal names.
The Property: Situated on the high street in a small south-west town, the semi-commercial property consisted of two shops and six buy to let flats.
The Finance: On their accountants' advice, the duo wanted to incorporate their current property portfolio into their new SPV limited company. While re-financing the semi-commercial property onto an appropriate limited company buy to let mortgage, they wanted to raise capital for further buy to let investment.
The Challenge: The COVID-19 pandemic significantly impacted many businesses. Consequently, many high-street lenders are more hesitant to lend on commercial and semi-commercial property because of possible lockdowns. Therefore, our first challenge was to source lenders that would consider our clients' property type.
Our second challenge would be securing a lender comfortable with our clients' wish to capital raise, with no further purchase lined up. While many lenders will accept applications like this, it would restrict our choices. It also meant our clients were after the highest loan to value achievable, meaning many lenders could consider it too higher risk.
Lastly, this application was one of four incorporation cases we were completing for the clients. For tax purposes, all completions needed to coincide, which added a significant amount of complexity!
The Solution: As a specialist mortgage broker, we have extensive experience sourcing finance for landlords purchasing with complex property criteria and requirements. With full market access, we quickly identified the mortgage lenders with criteria that included semi-commercial property, and that would allow the capital raise despite no immediate onward purchase.
Speaking directly to contacts at the most suitable lender, we proved that as the residential flats provided the majority of the rent needed to repay the mortgage, a high LTV would not be too much risk. As a result, we secured the most appropriate rate providing the capital raise required for our client's next purchase. We will continue to work closely with the lender and the clients’ solicitors to ensure all four incorporation cases complete simultaneously. Here are the details:
Property value: £845,000
Loan amount: £583,000
Rate: 4.35% 5-year fixed rate
Term: 20 years, interest-only
Mortgage payment: £2,109 per calendar month
Lender arrangement fee: 1.5% of loan (£2,572)
Rental income: £5,500 per calendar month
Gross yield: 8% per annum
Application: SPV Limited Company
Consultant: Robin Tait, 01625 416391
10th November 2021