£3 Million Remortgage and Capital Raise in Scotland

• Clients: UK National and Resident
• Property: Former boutique hotel in Scotland
• Property Value: £3,000,000 primary residence used as security
• Loan: £2,400,000
• LTV: 80%

Enness was approached by a successful property developer looking to purchase a former boutique hotel in Scotland for approximately £2.15 million. The client intended to operate the property as a short-term let, using projected rental income of around £150,000 to support affordability, while ultimately planning to convert the property back into a family home within five to ten years.

The client had significant wealth and a successful track record in property development, but their income was relatively sporadic and largely generated through capital gains. This created an additional consideration when assessing affordability, particularly as the client wanted to borrow against a property with a non-standard intended use.

The target property presented several challenges. It was a Grade A listed, 10-bedroom hotel, and the client intended to operate it as an Airbnb-style short-term let. The combination of the property's listed status, its existing use as a hotel and the proposed short-term letting strategy meant that many lenders considered the property to fall outside their lending criteria, despite its location in a sought-after area of Scotland.

Rather than relying on the hotel itself as security, Enness reviewed the client's wider assets and identified an alternative approach. The client owned an unencumbered primary residence valued at approximately £3 million, which could be used as security for the required borrowing. This allowed us to structure the finance around a standard residential property rather than the more complex hotel, avoiding many of the restrictions associated with financing the target property directly.

Using this approach, Enness identified a lender able to offer finance at up to 80% LTV, with up to 75% of the borrowing available on an interest-only basis. This structure helped reduce the client's monthly payments while providing the level of borrowing required. The lender was also able to assess affordability using the client's most recent two years of business accounts, taking a broader view of their financial position rather than relying solely on conventional employment income.

The solution demonstrated the value of considering the client's wider asset position when a particular property presents challenges for traditional lending. By securing the borrowing against the client's existing residential property, Enness was able to provide access to a more competitive residential financing structure while allowing the client to proceed with their plans for the Scottish property.

With access to a network of more than 500 lenders, Enness can explore alternative structures when a property's characteristics, proposed use or a client's income profile make conventional financing difficult. In complex cases, considering different security and structuring options can create a route to finance that may not be available when focusing solely on the property being purchased.

If you are looking to finance a property with an unusual use, complex income or specialist characteristics, speak to a mortgage specialist to discuss your circumstances.

Risk Warning:
Mortgages are secured against property and the property may be repossessed if repayments are not maintained. Interest-only borrowing does not reduce the capital balance during the interest-only period, so borrowers must have a suitable repayment strategy in place. Property values and rental income can fluctuate, and projected income may not always be achieved.

Disclaimer:
This case study is for illustrative purposes only and does not constitute financial, legal or tax advice. Finance is subject to status, underwriting, property assessment and lender criteria. Terms and availability will vary depending on individual circumstances and the proposed transaction.