We were contacted by a new client looking to remortgage one of his buy to let properties to raise money for improvements to his own home. As we take an holistic approach with our clients we reviewed their entire situation rather than just proceeding with a remortgage of his buy to let.
The current position the client was in was as follows:-
– Residential property with a mortgage that was coming to the end of the fixed period and payments were due to increase.
– Two mortgaged buy to let properties; both properties were complex. One was a semi commercial property and the other was a HMO plus flat attached.
– The HMO/flat had two long leases put in place by a solicitor who had made a grave error with them and created leases whereby the clients were BOTH freeholders and leaseholders which simply can’t exist in law. They were attempting to unravel this at the time the client contacted me however it was also causing issues with the existing lender.
– The applicants’ income was solely from property rentals which added to the complications for the residential mortgage in particular as many lenders won’t accept rental income for earned income.
Upon a complete review we advised the following:-
– Remortgage the residential property on to a new fixed rate mortgage and keep the term the same. As a residential mortgage is significantly cheaper than a buy to let mortgage would be, especially given the type of the two B2L properties, we advised raising the money on this property instead. The client agreed. The rate difference was a significant 1.66% and the loan was still only at 33% LTV.
– In addition, we were able to arrange an offset mortgage for the client which will enable them to offset the released funds until they need them and also save their rental cashflow offsetting their mortgage payments and saving them further money.
– On to the buy to let properties; we advised that the clients get rid of the long leases completely on the HMO/flat. This means we can raise a single mortgage on the property at a lower LTV instead at a much lower rate than the alternatives by keeping the leases in place. As the solicitors were in the midst of trying to rectify their error we advised him to tell them to simply expunge the leases instead. They did this at no cost to the clients.
This enabled us to raise a mortgage on the entire building raising sufficient funds to clear the current two mortgages secured on the property plus the mortgage on the semi-commercial property. The new mortgage was geared to only 46% LTV. The semi-commercial property would have been expensive to fund due to its nature and now it was unencumbered.
In summary we:-
• Raised £70k for the home improvements at a much lower cost than anticipated.
• The offset facility on the residential mortgage created further benefits and savings.
• £1783 INCREASE in monthly rental cashflow.
• £1278 NET INCREASE in monthly cashflow AFTER increased resi mortgage payment.
• Left with an unencumbered property worth £825,000.
The client commented:-
“Just thought I would drop you a note to let you know that the last mortgage has now completed so I am all sorted. I am really pleased with the outcome. The increased cash flow gives me the funding I need to reinvest. The advice you provided really was excellent and it was a pleasure dealing with you and Cheryl. I had been intending to restructure my mortgages for some time but couldn’t face the endless research and hassle. So it was great to have prompt feedback with sound advice and follow through. Your understanding of my requirements as a commercial and residential landlord, enhanced by your wealth of knowledge of suitable products made it a really pleasurable experience. Please feel free to share my feedback as I would absolutely recommend your services to anyone looking for sound financial advice. It’s been a rewarding experience. Many thanks for all you help.”