BTL Investment Capital Raise for Self-Employed Borrowers with Complex Income
The Clients: Two self-employed individuals, listed as directors for their limited company, were looking to purchase their first buy to let.
The Property: Our clients lived in a five-bedroom detached property in the Southeast countryside. With good travel links to London, and local amenities close by, the property was the clients’ forever home.
The Finance: Our clients wanted to remortgage and capital raise against their home to fund the purchase of a buy to let investment.
The Challenge: Our initial challenge with this case was that our clients had yet to find a buy to let property to purchase. Many lenders like to see an offer acceptance document for the onward purchase to prove what the money will be used for in order to lend, while some just need confirmation that a property has been found to purchase. However, in this case, the clients had neither. As such, the number of lenders we had access to was limited, as they had to be happy to lend the finance in good faith that our clients would use the money to purchase a buy to let property.
Both clients took salary and dividends from their businesses, which created our second challenge. Most lenders will solely use tax returns to base their affordability calculations on and ignore net profits. As such, our clients’ incomes alone did not satisfy affordability calculations and would be deemed insufficient to support the finance required.
The Solution: Our expertise and experience working on residential and buy to let mortgages meant that we quickly identified a lender happy to work to the criteria above. The lender we selected was happy to use an average of the companies’ net profits over the last two years to calculate the total borrowing amount. This allowed our clients to borrow double than if the lender solely focused on their salary and dividends.
The lender was also more than happy to lend despite the lack of property lined up to purchase. Due to our knowledge of these complex deals, we managed to achieve submission, offer and completion all within one month for our client. Given the backdrop of the current property market, these are exceptional results, and it’s important to note that this is not the norm for any type of application we are currently seeing. Here are the details:
Property Details
Property value: £1,400,000
Loan amount: £910,000
LTV: 65%
Rate: 3.46% fixed for 5 years
Term: 29 years, capital and interest
Mortgage payment: £4,150.86 per calendar month
Lender arrangement fee: £999
*Rate as at August 2022 and subject to change
14th September 2022
