A new client approached Enness seeking to refinance an existing buy-to-let (BTL) property to raise capital for the purchase of an additional investment property. The client owned a successful IT technology and sales business with their partner.
The existing BTL property was located in a desirable area of South East London and had recently been valued at approximately £1.6 million, with around £550,000 of existing borrowing secured against it. The client required a further £460,000 to support the acquisition of an additional investment property located close to their main residence.
The transaction presented several lending considerations. Rental stress testing meant that the required borrowing level was unlikely to be achievable through many mainstream buy-to-let lenders. The existing property was also let to a company connected to the client, which could create additional underwriting considerations.
The property had also previously experienced a period without a tenant, while the client had unsecured liabilities associated with the wider property position. The lender therefore needed to take a flexible approach to the overall circumstances rather than relying solely on standard buy-to-let criteria.
OUR SOLUTION
Enness approached a specialist lender experienced in more complex buy-to-let transactions and second-charge lending. The lender was able to consider the previous tenancy gap, the related-party tenancy arrangement and the client’s wider financial position, subject to its underwriting and lending criteria.
A second-charge facility was arranged to provide the additional capital required while leaving the existing first-charge mortgage in place. This avoided the need to refinance the existing mortgage and allowed the client to access the required funds without unnecessarily disrupting their existing borrowing arrangements.
The resulting facility provided approximately £460,000 of additional borrowing over a 15-year term on a variable-rate basis. The blended structure allowed the existing first-charge mortgage to remain in place while providing additional capital through the second-charge facility.
The client was able to access the required funding for the additional property purchase while preserving the existing mortgage structure on the original buy-to-let property.
This case demonstrates how second-charge and specialist buy-to-let lending can provide alternative routes to capital where rental stress testing, related-party tenancies, previous void periods or existing liabilities may restrict access to mainstream refinancing.
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, property suitability and lender criteria. Terms, rates, LTVs and availability may vary depending on individual circumstances.
Risk Warning:
Your property may be repossessed if you do not keep up repayments on your mortgage or other borrowing secured against it. Property values can fall as well as rise.
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.
