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Refinance of recently converted 5-bed HMO adjoining landlord’s home

Refinance of recently converted 5-bed HMO adjoining landlord’s home

We were approached by a broker whose client, a professional IT consultant and experienced landlord, wished to refinance a three-storey semi in West London that he had recently had converted into a 5-bed HMO.

The client had used short-term finance to buy the property and fund the conversion works and was now looking to refinance it onto a buy to let mortgage.

Whilst this kind of transaction is normally straightforward, the broker had been having difficulty placing the case as the property adjoins the client’s own home. Many lenders will refuse to provide finance in such circumstances due to the risk that the client may change or remove the boundary between the properties, which would lead to complications if the property should be repossessed.

Keystone’s Classic Range accepts cases where the client owns an adjoining property subject to a satisfactory valuation.

The valuation report recommended that new fencing would be required to create a clear boundary between both gardens before the case could proceed.

Within a month, the fencing and a few other minor issues were addressed and a second valuation was carried out. Happy with all other aspects of the application, Keystone offered terms and the case completed three weeks later.

Property value: £550,000

Loan amount: £270,000

LTV: 49%

Rate: 4.58% Term Tracker

Term: 10 years, interest only

RTI calculation: 145% @ 5.5%

Borrower: Individual

Mortgage payment: £1,027 pcm

Lender arrangement fee: 2% (£5,400) deducted from the loan

Rental income: £2,950 pcm

Gross yield: 6.44% pa

Broker proc fee: 0.6% (£1,620)

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