We worked with our clients to refinance their current owner-occupier mortgage onto a commercial investment to fund the purchase of a commercial buy to let property.
At a glance:
- Refinance from owner-occupier mortgage to commercial investment
- Capital raise from commercial to fund a holiday let
- Securing finance for first-time landlords
The Case:
Having run their successful consultancy business for nearly 20 years, our husband and wife clients decided that now was the time to scale back and relocate the business from the commercial premises to their own home. They planned to rent out the space as a long-term investment to generate extra income.
The property in question was a 4,000-square-foot commercial unit located on a large industrial estate in Surrey. Our clients purchased the property in 2005 as a new build, and knew it would be extremely popular to rent due to its prime location.
Our clients needed to refinance from their current owner-occupier mortgage onto a commercial investment loan and rent out the industrial unit. To diversify their property portfolio, our clients also sought a capital raise against this unit to fund a deposit on a holiday let investment property.
The Challenge:
The primary challenge with this case was that the premises had not been let out to tenants before. Having purchased the freehold property as a new build, the clients had sufficient evidence to show their trading company’s success from the premises; however, none to show demand from potential renters. As such, lenders wanted to see a tenant in place ready to occupy the building and a formal lease agreement readily available before they would consider lending to our client.
The holiday let application also created some challenges. We had to prove that our clients could service both the holiday let mortgage and the new loan on the commercial space. As such, finding a lender happy to approve both loan types proved challenging.
The Solution:
Our expertise and experience in the commercial market and our specialism within the holiday let sector put us in a uniquely advantageous position to approach this application. Our knowledge of the specialist commercial lenders allowed us to quickly identify which would be best to speak to about sourcing the finance for our clients.
As such, we approached a lender happy to offer based on the future rental income that the commercial property would generate. With our clients’ successful business accompanied by the extra income from the commercial unit, the lender was confident to assist with the holiday let application, offering particularly favourable mortgage rates. Having found one lender happy to provide solutions to both our clients’ finance requirements, we proceeded smoothly to completion.
Here are the details:
The Finance:
Property value: £425,000
Loan amount: £300,000
LTV: 71%
Rate: 5.89% fixed for five years
Term: 20 years Interest-only
Mortgage payment: £1,517.42 per calendar month
Lender arrangement fee: 1.50% (£4,500)
Rental income: £2,083 per calendar month
Gross yield: 6%
Application: Trading Limited Company
Next steps
Are you looking to secure a commercial or buy to let mortgage? Head over to our easy-to-use buy to let mortgage calculator to compare rates or get in touch with one of our expert commercial mortgage brokers.
