The clients are both portfolio landlords. The husband owns 14 Buy to Lets and the wife owns 12. They both have good credit and earnings. They also own their own residential property.
The wife owns a Buy to Let flat in her name only, but they wish to add the husband onto the mortgage, so it is jointly owned between them both. They are looking to release some capital as part of the process to pay to extend the lease, which is currently far too short. They are also looking to purchase the freehold of the property.
The block is two flats in a converted terraced house. There are multiple things to consider here. The first is the number of properties they already own, as some lenders have limits on how many properties people can own, as well as the overall loan to value and stress coverage over the portfolio.
The second thing to consider is the lease. Once a lease is too short, the value and re-saleability of the property decreases drastically. Another point to consider is we need a lender that will accept adding the husband on to the mortgage as part of the transaction. The final things that we need to worry about is the exposure in the block (50% ownership) and the purchasing of the freehold, as most lenders do not allow the freehold to be owned in the same name as the leasehold ownership in the same block.
Being a whole-of-market Broker, we have the knowledge to understand that some lenders have no overall portfolio limits and do not restrict ownership, loan to value or overall rental stress. We also work with lenders that are happy to allow submission and underwriting of an application of a property with a very short lease, if it can be added as a condition of the offer that the lease will be extended on completion with the money raised as intended.
Most lenders are fine with a transfer of equity to add someone to a mortgage as part of the transaction, and this is largely dealt with by the solicitors. Different lenders have different criteria for percentage of ownership in any given block. Some are 25%, some are 33% and some are 50%. In this case we had to get a Lender that was ok with half ownership within a single block.
The final aspect here is the freehold. This can be tricky as lenders do not generally like a leasehold on a flat to be owned under the name of the same legal entity as the freehold. The way around this was to inform the clients that they would have to purchase the freehold into a limited company name, so there was enough legal separation between the two.
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It is possible to achieve something with lots of challenges and moving parts. It’s just about knowing the lenders and having good experience with their set criteria.
Key things to consider for portfolio landlord remortgage of flat with very short lease, transfer of equity and raising money to purchase the freehold of subject property Debt to income ratio
- Some lenders have no restrictive limits on your existing portfolio.
- Some lenders are happy to lend with short leases so long as it’s a condition of the offer to extend it.
- Most lenders have no issues with transfer of equity transactions.
- Some lenders are able to lend on 50% of a block.
- Some lenders will allow you to own the freehold and leasehold in the same block, as long as they are owned by separate legal entities.
If you are seeking some free advice and guidance regarding how you could remortgage your Buy to Let property &/or Residential property and potentially also release some capital at the same time, then contact us today to speak directly with one of our CeMAP certified Mortgage Advisors. Call us today on 03330 169 646. Alternatively, please complete this short online form and one of our Advisors will call you right back.