Our client had recently purchased a property at auction for £675,000 They wanted to renovate the property and raise a new £820,000 mortgage after 8-12 weeks against the renovated value of £1.1m. The client wished to use the raised funds to buy a new property and repay £200,000 they had borrowed from their own business. It was crucial that the funds were released asap as the client required the funds to cover an upcoming tax bill.
We managed to secure a new buy-to-let loan for the client without waiting for the usual 6 months of ownership required by most lenders. The deal was secured at 2.69% fixed for two years with an added fee of £1,999.
There were many issues to consider. Firstly, most banks will not permit the mortgaging of a property until it has been owned for 6 months. The second issue was that many banks do not permit capital raising for business purposes. In addition, under new regulations, most banks now work to a rental stress test requiring that the rent received covers 145% of the interest payment at a stress test rate of 5.5%.
Based on a £3,175 per month rental figure the maximum loan offered by most banks would be just £477k. Finally, a handful of banks can use client’s personal income to cover any rental shortfalls. However, our client chose only to withdraw minimal dividends and salaries from his company.
An alternative which we wanted to avoid, was to opt for a deal offered by 2nd tier lender who could offer the full £820k loan within 6 months. However, their deal was charged at a 5-year fixed rate of 3.69% with a 2% (£16,400) arrangement fee.
We managed to secure a buy-to-let deal with a high street bank who were able to use the high-profit figures in the client’s companies to offset the rental shortfall and carry the full £820k loan. The bank was happy to allow capital raising for business purposes and they waived their usual “6-month rule” due to the quality of the overall case.
“The deal will save the client £31,000 over two years compared the next available option.”
Our client is delighted to have secured the full funds within the required timescale. They have replenished their company accounts and they have now secured the option to buy a new property for £2.8m. The deal will save the client £31,000 over two years compared to the next available option.
