- Client: UK national with a significant buy-to-let portfolio and rental income as their primary income source
- Property: Buy-to-let property valued at £5 million
- Challenge: Required up to £3 million refinancing without early repayment charges, despite having no employment income
- Finance: £3 million refinancing at 60% LTV, at 1.75% above Bank of England Base Rate over a five-year term, with no early repayment charges
Refinancing a substantial buy-to-let property while releasing additional capital can become more complex where the borrower’s income is derived primarily from rental property rather than employment. Enness was approached by a UK national with a significant buy-to-let portfolio who was looking to refinance one of their properties and release additional funds for future investment.
The property in question was valued at approximately £5 million and had an existing mortgage of £1.875 million. The client wanted to refinance up to £3 million, representing a loan to value (LTV) of 60%, with the additional capital intended to support the expansion of their wider buy-to-let portfolio.
The client was resident in the UK and held predominantly UK buy-to-let investments, alongside one overseas property. Their regular income came from the rental income generated by their property portfolio, with no employment income outside of their property investments.
Although the proposed 60% LTV was within the range that can be considered for a property of this value, the client’s specific requirements created additional challenges. They wanted to maximise the amount they could raise while avoiding early repayment charges. This was important because they wanted to retain the flexibility to sell the property during the mortgage term if the opportunity arose.
The absence of employment income also reduced the number of traditional lenders that were likely to consider the application. In addition, the client did not wish to use an assets under management (AUM) arrangement, removing another potential route that some private banks may use when structuring larger facilities.
Enness therefore looked towards private banking lenders that were able to take a broader view of the client’s property portfolio and rental income. The objective was to find a lender willing to consider the size and quality of the underlying asset while accommodating the client’s requirement for flexibility around early repayment charges.
Following negotiations, Enness secured £3 million of refinancing against the £5 million buy-to-let property, representing 60% LTV. The facility was arranged over a five-year term at a rate of 1.75% above the Bank of England Base Rate at the time.
Crucially, the facility was negotiated with no early repayment charges. This provided the client with greater flexibility should they decide to sell the property during the mortgage term, while also allowing them to release approximately £1.125 million above the existing £1.875 million mortgage.
The resulting structure allowed the client to repay their existing borrowing while releasing additional capital to reinvest into their wider buy-to-let portfolio. The substantial equity remaining in the property also provided significant headroom within the new financing structure.
The case demonstrates how buy-to-let mortgage finance can be structured around experienced landlords with substantial property portfolios, particularly where rental income forms the main source of income. Where standard lending criteria do not accommodate a borrower’s circumstances, private banking lenders may offer greater flexibility, subject to individual circumstances and lender criteria.
For landlords looking to refinance an existing investment property and raise additional capital, specialist private bank mortgage solutions can provide alternative funding structures where conventional buy-to-let lending may not meet the required objectives.
Disclaimer:
This case study is for illustrative purposes only and does not constitute financial, legal, tax or investment advice. Finance is subject to status, underwriting, affordability, valuation, property suitability and lender criteria. Terms, rates, LTVs, fees and availability may vary depending on individual circumstances.
Risk Warning:
Property securing finance may be repossessed if repayments are not maintained. Property values can fall as well as rise. Buy-to-let and investment property finance carries risks, including changes in rental income, property values, interest rates and refinancing conditions. Borrowers should ensure they have a suitable strategy for servicing and repaying the borrowing.
Information contained in our case studies is for market and illustrative purposes only. In some cases, these may be made up of multiple cases and are for illustrative purposes only.
Some case studies are made up of enquiries that have come into the business, not all business completes, and the posting of a case study does not represent a completed piece of business.
Property values can fall as well as rise, and you may not get back the amount originally invested. Property investments can be illiquid and may take time to sell. Where borrowing is used, your property may be repossessed if you do not keep up repayments on a mortgage or other loan secured against it.
