Complex Buy-To-Let Refinance Required In Eight Weeks
18th May 2023
Key Facts
- Requirement: Buy-to-let refinance on a high-value Mayfair property
- Borrowers: Retired, UK-based clients
- Property value: £1,250,000
- Mortgage balance: £650,000
- Other considerations: The clients only had rental income, and required a refinancing solution within eight weeks
In this case, we were approached by UK-based clients who own an investment property in Mayfair, London. The term of the mortgage was expiring in eight weeks, and the clients were not in a position to repay the debt within that timeframe.
The clients’ income was generated exclusively from rental generated via three investment properties they own in Prime Central London - they didn’t have any other income, although as high-net-worth individuals, they did have a significant investment portfolio held offshore.
In terms of arranging finance, the case was complicated by the fact that one of the clients’ London properties is a holiday let used to offset a significant portion of their rental income for tax purposes. While this was fiscally advantageous, it meant that their tax returns showed very limited income. Given their personal rental payments and mortgage payments on all three properties came to at least £20,000 per month we knew it would be challenging to find a lender that would offer a mortgage given the large monthly rental requirement across all three properties, and the fact that the clients didn’t have income generated via other means.
As there was a £100,000 buy-to-let remortgage shortfall on the mortgage that was coming to term (given the increases in lenders’ ICR stress calculations), and ‘topslicing’ wasn’t an option to increase the debt as the clients had no excess personal income, we were tasked with finding a completely bespoke solution. While the clients had an offshore investment portfolio that could have been utilised to facilitate the transaction to a new lender, this was a last resort, as the clients didn’t want to sell or transfer custody of the portfolio to another bank due to their long-standing relationship with their existing asset manager.
Considering their needs, we approached a specialist bank that agreed to monetise the client's overseas investment portfolio given its relatively liquid nature. In simple terms, the bank used a percentage of the investment portfolio to evidence potential personal affordability to ‘topslice’ and meet the required loan size, without the clients drawing down on the funds, as was their wish. We negotiated that the bank we approached offered didn’t take any ownership of the investment portfolio in return for offering a mortgage. We were therefore able to complete the refinance in the required timeframe, meet the client’s request not to transfer custody of their portfolio to another bank and not create any potential negative tax implications.
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