Complex bridging loan for buy to let purchase ahead of stamp duty

THE SCENARIO

A client was recently referred to Enness by her sister, whom I had previously secured a mortgage for, as she was looking to purchase an additional buy to let property. However, this case was more on the complex side as it consisted of four properties in total…

My client already owned a buy to let property in London as well as her main residence, which had an existing mortgage of £150,000. She needed to remortgage in order to raise it to £250,000 so she could put down £100,000 as a deposit for the new buy to let purchase in St Albans. My client also needed to sell her existing buy to let property to be able to put down the additional £100,000 required to make up the total deposit for the new buy to let. Effectively looking to sell one buy to let to purchase another.

The key issue we faced in securing this deal, was the fact the new buy to let property was actually worth £300,000 more than her main residence, which nearly every lender will struggle with on the basis the client may be intending to live in it instead. Not only this, my client wanted to sell the current buy to let property to complete simultaneously with the purchase ahead of the stamp duty changes at the end of the month, which is almost unheard of. Equally, my client only had 2 years’ worth of limited company accounts for the remortgage on her main residence, as opposed to the 3 years’ worth that is usually required by lenders.

If that wasn’t all – my client needed a £100,000 bridging loan on the buy to let to put down as the deposit so we could complete before stamp duty changes, relying on the sale of the current buy to let to then pay off the bridging loan. This is where property number four came in.

We were unable to simply secure the bridging loan on the current buy to let as it already had an existing mortgage and not enough equity. Instead, we used my client’s mother’s property – which was worth £1 million – because it had no mortgage. This meant we were able to take equitable charge over the fourth property and secure a bridging loan on both this and the buy to let for security.

Despite the majority of lenders not accepting this case, the main reason we were able to secure a deal was because the new buy to let purchase was in a completely different location. My client lives and works in central London and her daughter will be going to school there, proving that she was only buying outside of London to benefit from the better rental yield. Essentially able to receive more for her money, my client as had an estate agent friend who would be able to rent out the property for her.

OUR SOLUTION

We needed to gear the loan to value up to 75% for the new buy to let, a lending amount that doesn’t fit with most high street lenders’ stress tests. Despite this, we were able to source a more flexible lender with lenient stress tests and still secure a competitive rate of 3.65%.

I also managed to obtain an extremely low bridging loan rate of 0.59% of the loan amount per month, with no early repayment charges.

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