Find out how we secured a competitive remortgage for a property in Southeast London despite low rental income, a property down-valuation, leasehold challenges, and lender hesitations.
At a glance:
- A remortgage from a tracker rate to a fixed deal
- A long-standing tenant paying below-market rent
- A down-valuation that held up the application process
The Case:
Our client wanted to remortgage from their long-term tracker deal to a more competitive five-year fixed rate. The goal was to improve the rental yield from this property, as the long-standing tenant was paying below-market rent.
The property in question was a leasehold flat based in Southeast London. The combination of the client’s leasehold-freehold connection with the below-market rental income restricted the number of lenders we could approach with this deal.
The Challenge:
The primary challenge with this case was finding a lender to offer the full required loan amount. We needed a lender willing to lend based on the market rent rather than what our client was receiving, as this would not sufficiently meet lender stress tests.
Tough affordability calculations have seen many landlords struggle to secure competitive mortgage rates over the last 18 months, so we had a good idea of which lenders would consider this case.
While the first lender we approached was comfortable with the case on paper, unfortunately, the valuer down-valued the property by £50,000. This was a significant setback as it meant our client could not borrow the amount they needed to repay the outstanding tracker mortgage.
Optimistic that we could secure the full loan amount needed for our client, we utilised our extensive market knowledge and established relationships with other key lenders to try and place the case. We quickly identified and approached a new lender willing to assess the case at the market value of the property price and rent. Following a new valuation that met expectations, we secured our client’s finances to maximise yields and secure cashflow for 5 years.
The Finance:
Property value: £400,000
Loan amount: £300,000
LTV: 75%
Rate: 4.89% 5-year fixed*
Term: 25 years, interest-only
Monthly mortgage payment: £1,259.32
Lender arrangement fee: 3% (£9,000)