After completing extensive refurbishment works, our client was looking to refinance their 10-bedroom HMO to fund their next purchase. With lender criteria challenges and concerns over a private investor, find out how, with MFB’s expertise, our client secured the finance.
At a glance:
- Experienced landlord specialising in refurbishing neglected properties into HMOs
- A capital raise against a recently refurbished 10-bedroom HMO
- Challenges related to private investment in property and the property's size.
The Case:
Our client had recently purchased an old Victorian house using his savings and funding from a private investor. After acquiring the property, the client completed heavy refurbishment works to convert it into a 10-bedroom HMO. He approached us looking to capital raise against the property to fund his next purchase and refurb project.
As our client already owned several investment properties and planned to grow his portfolio further, finding a competitive 5-year fixed rate was his main priority. Having worked with MFB on several cases before, the client returned to us confident we could help.
The Challenge:
As a 10-bedroom HMO, most buy to let lenders wouldn’t consider this property on their standard criteria, which immediately meant we’d be looking for a specialist product. In addition, many lenders are uncomfortable dealing with cases in which private investors are involved. This meant that finding a competitive mortgage rate was going to be challenging.
Furthermore, the refurbishment works had significantly increased the property’s value. Having purchased the property for £415,000 in July 2023, our client was looking to refinance it at a value of £800,000 just three months later. Given the size and the value, we had to find a lender happy to complete a commercial valuation.
The key to successfully closing the deal was MFB’s thorough understanding of the challenges. Our client was paying the private investor a significant monthly interest rate, so we needed to handle this carefully and efficiently. We diligently approached a few specialist lenders with all the details and quickly found a lender comfortable with the property and the private investor. Consequently, our client was able to borrow sufficient funds to repay the investor and source his next deal.
The Finance:
Property value: £800,000
Loan amount: £600,000
LTV: 75%
Rate: 5.29% 5-year fixed*
Term: 25 years, interest-only
Monthly mortgage payment: £2,711.12
Lender arrangement fee: £15,000
Monthly rental income: £7,200
Gross yield: 10.8% per annum
*Rate as at October 2023.
