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Categories: Case study | limited company
Investing in property can be enough of a risk for experienced landlords. For first-timers, it can be even more daunting. Many lending companies will be understandably cautious to work with new investors. However, as a famed Peckham tradesman would say, ‘He who dares wins.’
Fortunately for one particular landlord, our expert advisors were on hand to help broker an excellent deal with a lender – one that is sympathetic towards those without much property experience, as well as those looking for a high LTV (loan to value). This case study shows that having the courage to take a step into unfamiliar territory can really pay off, with the right kind of support in place.
If you are in a similar situation to this client or looking to become a landlord, we hope that this case study gives you some inspiration to follow your dreams while also addressing any fears you may have.
The case
Investment route: The investment was made via a limited company.
The existing portfolio: One residential property, no previous rental properties.
The property: A large studio flat.
The tenancy arrangement: Standard 12 month AST (assured shorthold tenancy).
The borrowing requirement
The client needed a fixed rate, interest-only repayment mortgage for a buy to let studio flat. He wanted to look at an 85% LTV (loan to value) purchase of a property in a limited company. He had a flexible budget in place for fees and his own solicitors. His overall goal, which he was very passionate in pursuing, was for this flat to be the first of many rental properties that would come under his new limited company.
The challenges we overcame
The landlord’s overall inexperience is a challenge we had to overcome in securing a good deal, as the client only had a 15% deposit and one residential property. However, as is often the case, this proved to be less of an obstacle than one would expect. There are several lenders that are happy to work with first-time landlords.
What’s more, the applicant had some issues with adverse credit in the past, which can be another hurdle in securing finance.
We managed to find a lender who would provide up to 85% LTV mortgages and would accept a limited company application. This was exactly what the client needed, so we were able to progress the case. The lender also had no issue with the client’s inexperience, his deposit or his credit history.
The client was looking at a large, 40 square metre studio flat. This was fortunate because lenders typically have a minimum square metre requirement within their criteria (25-30 square metres, usually).
Ultimately, the turnaround for the whole application was blisteringly fast – it took a mere five weeks for it to complete. What’s more, were it not for a very minor delay, it could have been completed even faster – three weeks, under optimal circumstances! No matter how urgently a client needs a deal in place, our advisors will do everything they can to meet a deadline.
The solution
Property value: £160,000
Loan amount: £136,000
Loan to value: 85%
Rate: 6.64%
Term: 5 years
Payment basis: Interest only
Monthly mortgage payment: £733
Monthly rental income: £950
Lender arrangement fee: Nil
Gross yield (before costs): 14.04%
Do you need help securing a mortgage?
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