We were approached by a broker whose client was looking to remortgage and raise capital on recently purchased and refurbished block of flats.
The client is a very experienced landlord with more than 20 rental properties mostly located in towns on the South Coast.
His modus operandi is to buy run down blocks of flats, refurbish them then let the units out to students and working professionals. On the advice of his accountant, he mostly operates via an SPV limited company.
The block in question, comprises two 3-bed flats and one x 2-bed flat which he had purchased three months before with a buy to let mortgage with no early repayment charges. Having fully refurbished and let all three units, the client was looking to refinance onto a buy to let mortgage at the new market value and release funds for further purchases.
Most lenders will not finance properties until they have been owned for a minimum of six months, and many that do will only allow a remortgage at the original purchase price.
Added to this, most mainstream buy to let lenders will not touch multi-unit properties or limited company borrowers so the broker knew that this was clearly a case for a specialist lender such as Keystone.
Keystone agreed in principle that both the client and the property were a good risk and offered to lend subject to the loan amount being no greater than the original purchase price.
This stipulation was acceptable to the client and following terms were offered:
Property value, post refurbishment: £700,000
Original purchase price: £500,000
Loan amount: £500,000
Rate: 4.19% 5 year fixed
Term: 25 years interest only
RTI: 125% @ 4.19%
Product: Classic Range
Borrower: SPV Limited Company
Lender arrangement fee: 2% (£10,000)
Mortgage payment: £1,780 pcm
Rental income: £3,500 pcm
Gross yield: 6% pa
Broker proc fee: 0.6% (£3,000)