Scottish Multi-Unit Holiday Let Purchase using Further Advance

Scottish Multi-Unit Holiday Let Purchase using Further Advance

27.04.22 | Written by: Andy Elley

The Clients:  Experienced landlords and holiday let owners. They had a substantial background income from their day jobs, making them ideal applicants to lenders.

The Property: A multi-unit property located in the Scottish Highlands, comprising of a detached house, detached garage, and a detached cottage. The property was ideally located, with access to local amenities such as shops and transport facilities for visitors to use.

The Finance: Our clients were looking to purchase this property, so required funding to support their deposit.

The Challenge: The case created two challenges for us, the initial being the deposit source. As experienced landlords, our clients wanted to use a Further Advance to capital raise on one of their existing Scottish holiday let properties as a deposit. Despite the fact this property had increased in value following refurbishments, our clients only completed on the purchase during the 2021 COVID lockdown. This meant that it lacked evidence of letting income, meaning lenders were wary of this as a source of secure funding.

The second challenge we faced was that the Highlands location meant limited lender appetite and availability. With very few lenders happy to offer on properties in this area, our options were restricted.

The Solution: Our experience and expertise in Holiday Lettings meant that we knew to get in contact with a reputable holiday let agent local to the area. The agent used their professional opinion to work out projected holiday lettings income for both properties, which worked out at £36,000 per annum for their existing property and £60,000 per annum for the new purchase. With these projected earnings presented to our clients’ current lender, they were happy to offer a loan for the purchase. Here are the property details:

Property one: Further Advance
Property value: £400,000
Further advance amount: £84,850
LTV: 21%
Rate: 3.99% five-years fixed
Term: 14 years (interest-only)
Mortgage payment: £282.13 per month
Lender arrangement fee: £999
Rental income: £3,000 per calendar month.
Gross yield: 9%
Application: Limited company

Property two: New Purchase
Property value: £450,000
Loan amount: £337,500
LTV: 75%
Rate: 4.84% five-years fixed
Term: 15 years (interest-only?)
Mortgage payment: £1,361.25 per month
Lender arrangement fee: £999
Rental income: £5,000 per calendar month
Gross yield: 13%
Application: Limited company

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

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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