An experienced landlord sought a buy to let mortgage for an end terrace house with a large plot of land. They aimed to create two titles: one for the home and another for the land, permitting them to carry out future rental development.
At a glance:
- An experienced landlord purchasing a property through their LTD company
- A property with a large plot of land and potential for development
- Simultaneous creation of two separate titles on completion
The Case:
Our client, an experienced landlord, came to us for support securing a BTL mortgage. Before contacting us, they found a 3-bedroom end-of-terrace house they wanted to let, accompanied by a large plot of land.
Our client explained that they hoped to divide the plot into two separate titles upon purchase. As a result, they would be able to rent out the existing property whilst building another buy to let on the land next to it.
The Challenge:
Creating two separate titles at the same time as purchasing the property is complex in itself; however, the ensuing land development was the primary challenge of this case.
Many lenders are hesitant to finance properties undergoing nearby development or construction due to potential noise disturbances and reduced aesthetic appeal, which can deter prospective tenants. This situation poses risks for both the client and the lender.
Difficulty in finding tenants or experiencing frequent tenant turnover can lead to financial instability, potentially resulting in missed mortgage payments and repossession. If the lender also struggles to sell the property and recover the loan amount, it becomes a financial risk for them. Therefore, our challenge was to find a lender willing to accept these circumstances.
Having discussed the case in depth with several of our contacts from specialist buy to let lenders, we found one prepared to accept these complex components and offer a competitive rate. Furthermore, the lender exceeded our client's expectations by permitting them to deduct the value of the land from the purchase. Our client’s used cash savings to pay for the value of the plot of land they wanted to develop on.
By doing this, our client had the charge of the property registered with the lender and build another buy to let held in a separate title on the land. Once development is complete, it can then be financed to release their purchase costs. Fortunately, the lender expressed an interest in financing the new property, too.
The Finance:
Property value: £210,000
Loan amount: £147,000
LTV: 70%
Rate: 5.49% 5-year fixed*
Term: 25 years, Interest-only
Monthly mortgage payment: £696.18
Lender arrangement fee: 3.5% (£5,145)
*Rate as at September 2024 and subject to change.
Next steps
If you have a similar project you would like to discuss, get in touch with one of our team.
