Buy to Let Mortgage with Refurbishment Product

THE SCENARIO

I recently secured a buy to let mortgage for a client, with a refurbishment product along the way after a surveyor’s comments resulted in the lender putting a full retention on the loan.

My client came to Enness after being told by other brokers that they wouldn’t be able to help her. She was a professional developer with a portfolio of around ten London properties, and was looking to purchase a further buy to let for £1.5m. Her situation and requirements were slightly complex, and all the other brokers she had spoken to had turned her away.

My client wanted a very high loan to value of 80%. Finding a lender willing to consider this size of mortgage for a buy to let was my first challenge. The other problem was that the rental income this property would generate wasn’t sufficient to service the loan. After assessing her other properties, however, we were able to release sufficient equity for her to be able to raise the difference.

A routine valuation created a few more obstacles, however. The surveyor wrote in his report that the property needed some renovations before it was ready to rent on the market. The kitchen and bathroom needed to be refurbished, and the light fittings replaced.

On the basis of this valuation the lender put a full retention on the loan, meaning the money was withheld until all the works were finished. My client was left in a difficult position with the vendor pushing for completion, but the lender refusing to release the funds which would enable her to do so.

I therefore suggested that we find a lender who would be happy to offer her a light refurbishment loan in the interim. This would enable her to complete the building works, complete on the purchase and then return to the original lender having increased the property’s value.

OUR SOLUTION

I found a lender who was happy to offer her a loan of £1m with which to complete the refurbishments. After the works, the property was revalued at £1.7m. At this point we went back to the original lender and secured a loan of £1.1m at a 2.39% discount off of the lender’s standard variable rate. This covered the cost of the interest payments on the first product. After the refurbishments, the whole mortgage was completed within one month, which was an excellent result for my client.

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