We were approached by a broker, whose client wanted to refinance a terraced house that he had purchased at auction with the help of £61k bridging loan just four months before.
The client had paid £88k for the house which needed a new kitchen and bathroom and general redecoration before it could be let on a multiple occupancy basis to four separate tenants. Although classed as an HMO, the property did not require a licence from the local authority.
He spent £10,000 on the refurbishments which increased the property's value by £27k. Naturally, the client was keen to get a buy to let mortgage based on the property's new, increased market value.
The broker placed the case with Keystone because most other buy to let lenders will not provide refinance on properties which have been owned for less than six months. Further, those that do, usually only allow a remortgage at the original purchase price and will not lend against any uplift in value due to refurbishment works. Keystone lends on both scenarios.
The client made the application using his SPV limited company. In addition to the standard supplementary documentation, our underwriters asked to see a schedule of works and receipts to prove the refurbishment works had been successfully completed.
Happy that the client and the property were a good risk, Keystone offered terms based on the following Classic Range rate which is available to both individual and corporate applicants:
Original Purchase Price: £88,000
New Market Value: £115,000
Loan amount: £92,000
LTV: 80% (based on New Market Value)
Rate: 4.19% 3 Year Fixed
Term: 25 years interest only
RTI calculation: 125% @ 4.19%
Lender arrangement fee: 2% (£1,840)
Borrower: SPV Ltd Co
Mortgage payment: £321 pcm
Rental income: £1,560 pcm
Gross yield: 16.3% pa
Broker proc fee: 0.6% (£552)