Our commercial investor client needed to reduce their increasing mortgage payments. Despite initial lender challenges from company ownership changes, find out how MFB used effective negotiation and clear financial documentation to secure competitive commercial terms.
At a glance:
- A commercial investment product transfer for a beauty salon business
- A change in the Trading Limited Company’s Directors complicated the application
- Our client faced significant mortgage payment increases due to successive Bank of England Base Rate rises
The Case:
Our client owned a commercial lock-up freehold property within their Trading Limited Company, which ran a beauty salon on the premises.
The client approached us looking for a product transfer to reduce their monthly payments, which had increased significantly following ongoing Bank of England Base Rate rises. With good company accounts from the salon and an overall high net worth for the business, the case was strong and likely to be accepted by their lender.
The Challenge:
At the point of purchase, the business and the Trading Limited Company were within our client’s wife’s name, but our client has since taken over full ownership of both. Unfortunately, our client had not informed their lender of the changes to the Trading Limited Company ownership. We don’t recommend doing this as you may breach your mortgage terms and conditions and delay your next mortgage application.
Because the ownership structure had changed entirely since the original property purchase 10 years ago, their existing lender considered this a brand-new application and, therefore, not eligible for a straightforward product transfer. In fact, the lender initially said it wanted the case refinanced to a different lender altogether!
After a declined application from our lender, we quickly negotiated with the credit department to support the case. We demonstrated the adjusted net profits of the business to show the business had more than sufficient earnings before interest, taxes, depreciation, and amortization (EBITDA) to service the mortgage.
We also provided the clients’ tax calculations to show their high personal income, which reassured the lender of the Trading Company’s ability to cover the mortgage costs, as well as an updated and clear company structure. Thanks to our knowledge and negotiation skills, MFB was able to secure the 5-year fixed product transfer product, reducing our client’s mortgage repayments by nearly £300 a month.
The Finance:
Property value: £450,000
Loan amount: £201,632
LTV: 45%
Rate: 5-year fixed
Term: 5 years, interest-only
Monthly mortgage payment: £1,371
Lender arrangement fee: 2%
Rental income: £2,500
Gross yield: 6.6%
*Rates as at July 2024
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