How to finance one freehold title with multiple buildings
Some time ago Gary, one of our buy to let investors, called for a chat about an idea that he been considering, following a recent visit to his long standing Accountant.
Gary’s Accountant, knowing him very well, suggested that the purchase of a holiday let property would be a good addition to his property portfolio, in terms of providing considerable lifestyle and tax benefits to his overall financial position.
Our holiday let broker talked Gary through the basics and Gary was confident that this was a good investment opportunity.
Two weeks later, following a trip to his favourite part of North Wales, Gary called us with a property deal he was interested in. However, Gary wasn’t sure how best to structure the funding as it was more than just one property.
He went on to explain that the current vendor lived in the main property and had already converted two outbuildings into two fully self-contained cottages within the boundaries of the land. These were being successfully let but Gary could see some potential to improve the income. However the planning permission on the cottages was conditional that the cottages must be used for holiday letting purposes only (this is known as a 52 week usage restriction). Due to nature of the property, Gary thought that it may not fit the criteria of a holiday let mortgage but would end up being classed as commercial finance, which he knows comes at a higher interest rate.
Through his experience, our broker knew immediately that most conventional mortgage lenders would reject this case. Multiple dwellings on a single title are not standard lending criteria and usually come with an instant “no” and the clincher was the usage restriction.
However, this type of property security is quite often presented to specialist brokers, and our advisor contacted a lender with whom Holiday Let Mortgages has a strong relationship. He knew that the lender would look at the whole picture, and if there was good solid reason to lend, they would lend.
Our specialist broker knew that the lenders underwriter would consider:
- Gary’s personal financial strength, could he support himself without having to use the income derived from the holiday lettings?
- The property as a whole in terms of saleability, should repossession be necessary
- If the projected gross income from the holiday let strong enough to support the loan
Gary’s financial situation was strong so the underwriter was happy to take the case. Holiday Let Mortgages got the loan agreed at 70% loan to value and at non-commercial interest rates.