Area: London
Amount raised: £1.6 Million
Listen to this case study here
The scenario
We helped a client purchase a London home for £1.4 million and refinance their second home to a holiday let, despite the challenges of high loan to value and short-term letting.
The client had agreed to purchase a residential home in London for £1.4 million. They were renting in the capital and they owned an existing residential property on the east coast. They were looking to obtain 85% Loan to Value (LTV) on the purchase and 85% on their second home. The second home was occasionally let via air BNB, but it was not let all year round. The total borrowing required was approximately £1.6 million.
The client was working for magic circle law firm and was progressing well in their career. They wanted a good long-term solution for both properties which would keep their intended use in line with the conditions of their mortgage. They also wanted to ensure they were not overpaying for the finance.
The client’s second home was occasionally let via air BNB, but it was not let all year round. The total borrowing required was approximately £1.6 million.
The solution
Where the borrowing exceeds £1 million and the property is a second residential home, the market is more restricted. The reason for this is that lenders will typically apply their second home policy, regardless of if the property they are financing is to be the primary residence. Due to the client’s requirement, we were able to arrange a competitive loan with a private lender, over a term of 34 years. This ensured payments were as low as possible and the client has the ability to overpay, if they would like to reduce the loan quicker.
Refinancing the client’s second home was a more straightforward transaction as the property value was under £500,000. While we still needed to use a lender who was comfortable with the intended use of the property, a mortgage was arranged on standard residential rates and the client is permitted to let the property for up to 12 weeks per year. This fit in with their intended use.
To provide an idea of the savings, the difference in the interest rate charged between a residential loan which permits short-term letting and a holiday let mortgage is at least 3%. This means for every £100,000 of borrowing, you would pay an additional £3,000 per year in interest, if you are on a loan which is not entirely suitable for your situation.
If you are looking at a high loan to value residential purchase or you are looking to switch a property to a holiday let mortgage, then Orton financial can offer a free consultation to discuss your options further.