The Clients: Experienced property developers who had built and sold at least 10 properties. They operated via an SPV Limited Company, consisting of 3 Directors and 6 Shareholders in total. The company did not own any property as developments were always sold upon completion.
The Properties: Two 4-bedroom detached houses, situated in a residential area in the South of England, close to local amenities such as schools and shops.
The Finance: The clients had taken out development finance to build the properties but were having issues selling them in the slow property market and, therefore, unable to pay off the existing finance. They had decided that it was better to keep the properties as buy to let investments and required buy to let mortgages for both the properties.
The Challenge: With an expensive development loan building up interest, the clients were keen to drawdown the buy to let mortgage as soon as possible in order to pay this off, so we needed a lender that would be able to move quickly.
Recently built, the properties were still on one title; this greatly affected the mortgage products available to the clients so they would need to be split into two separate titles. This additional paperwork had the potential to slow down the process and incur an additional cost through solicitors’ fees.
The other issue we encountered with this case is that most buy to let lenders restrict the number of applicants to 4 individuals, however for this case there were 6, greatly reducing the number of lenders available to them.
The Solution: Using our knowledge of the market, we were able to narrow down the lenders with criteria the clients would meet and that we knew would be able to complete the underwriting quickly. Once we’d discussed available buy to let mortgages rates with the clients, we secured a lender who was able to approve the application under the condition that the client’s solicitors would split the properties onto two titles upon completion. Although this did cost a little extra in solicitors fees, the mortgage product we secured didn’t have an arrangement fee, much to the delight of the client. The lender was very understanding of the time pressure on this case, and everything moved along quickly so that the development finance debt was paid off. Both properties had identical finance arrangements - here are the details:
Property values: £420,000
Loan amounts: £306,000
LTV: 73% (per property)
Rate: 3.78% 5-year fixed
Term: 20-years, interest-only
Mortgage payment: £964 per calendar month
Lender arrangement fee: Nil
Rental income: £1,350 per calendar month
Gross yield: 3.85% per annum, per property
Application: SPV Limited Company
Consultant: Robin Tait, 01625 416391
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17th January 2020