Case Study: Client With One Year’s Accounts Releases Equity On Buy-To-Let In Order To Buy Next Home

Our client – a UK business owner – wished to raise finance in order to purchase the property he had been renting for the previous twelve months. The problem, however, was that he did not have two years’ worth of accounts, which meant that most lenders would not consider his case.

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Proposition

Our client – a UK business owner – wished to raise finance in order to purchase the property he had been renting for the previous twelve months. He had agreed a price of £400,000 with his landlord and needed to raise £350,000 promptly or risk the sale falling through.

Our client owned a buy-to-let property worth £270,000 on which he had a mortgage of £50,000. He approached his existing lender in the hopes of remortgaging this first property and releasing the equity with which he could facilitate the purchase of the second. His application, however, was summarily rejected, which was when he came to us.

The reason for this initial rejection was that our client had spent a number of years prior to his twelve-month tenancy travelling around the world for work. He had therefore not been liable to pay tax in any specific region during this period of time, because he had not settled anywhere, which meant that although he was able to show income through his business’s profits, his tax documents showed that he had earned nothing until he returned to the UK twelve months earlier. Most lenders – particularly high-street lenders – require two-years of accounts from self-employed borrowers, which was why our client was unable to acquire the mortgage he required.

Solution

Private Finance is able to draw on a vast wealth of industry experience and expertise when attempting to pair our clients with their ideal lenders. On this occasion, we were able to utilise this knowledge pool in order to identify a number of lenders we knew did not have income requirements for buy-to-let mortgages. Having compiled this list, we then worked out which of these lenders were able to offer our client the most economical deal given the specifics of his case; and as a result of these efforts, our client was able to remortgage his BTL property at a competitive rate while releasing £123,000.

Combined with his savings, this gave our client a deposit of £163,000, providing him with the necessary deposit to purchase the property he had been renting. The complications entailed in the acquisition of this second mortgage were almost identical to those involved in the acquisition of the first – we needed to find lenders that were comfortable with our clients’ unique income profile. Having done this, we were able to secure our client the residential mortgage he required at an extremely competitive rate.

Lending Facility

On his BTL property, we were able to obtain our client a 5-year-fixed rate mortgage of £173,000 at a rate of 2.09% and an LTV of 65%. Having released £123,000, we were then able to secure our client a two-year fixed-rate mortgage of £237,000 at a rate of 1.95% and an LTV of 65%. Even better for the client, these rates turned out to be lower than rates he was aiming to achieve when he went direct to his previous lender.

We were able to arrange both of these mortgages within two weeks, and our client was able to purchase his desired property without any further hitches.