| Loan amount | £8,500,000 |
| Property value | £13,000,000 |
| Loan-to-value | 65% |
| Property type | Freehold block (56 units) |
| Location | North West England |
| Term | 25 years interest-only |
| Rate | 5-year fixed |
| Lender type | Commercial BTL lender |
The Story
Fox Davidson work with property professionals including landlords and developers. Our area of expertise sometimes finds us securing funding on very large and complex types of property. An existing client got in touch to discuss funding the acquisition of a large block of flats held under one freehold title in Swindon. Our client holds a multi-million-pound portfolio of property and had recently negotiated a reduce purchase price to purchase the entire freehold development of 56 flats from a developer.
The Challenge
The challenge presented by our client, a seasoned professional property investor eyeing a 56-flat freehold block, was certainly no ordinary feat. Acquiring such a substantial property involves a myriad of considerations, from the intricacies of the building itself to the specific demands of lenders in this niche. Traditional mortgage brokers might shy away from such complexities, but at Fox Davidson, we see it as an opportunity to showcase our expertise in securing mortgages for unique and complex property types.
Our journey begins with our deep specialisation in funding freehold blocks of flats. Understanding the unique challenges and opportunities these properties present is crucial, and it’s an area where Fox Davidson excels. We work closely with specialist buy-to-let lenders who focus specifically on financing large HMO’s and MUFB’s. This partnership ensures that our clients receive not only specialist solutions but also the benefit of dealing with lenders who comprehend the nuances of managing large-scale residential properties.
Property Analysis:
Navigating the complexities of acquiring a freehold block containing 56 flats requires a meticulous and thorough approach. We analysed the property considering any unique features or challenges associated with the building. We assessed unit size, tenant profile, EPC rating and market demand. This detailed assessment laid the groundwork for our specialist approach in securing the right mortgage.
Collaboration with Specialist Lenders:
Our specialisation allowed us to identify and collaborate with lenders who have a proven track record in financing freehold blocks of flats. These specialist buy-to-let lenders not only understand the intricacies of managing large residential properties but also offer mortgage products that align with the specific needs of professional property investors. This collaboration is a testament to our commitment to providing solutions specialist to the unique demands of our clients.
ESG Discounts:
In the current market investors and lenders alike favour properties that have good green credentials. With EPC rules coming into effect in the coming years it is prudent to be purchasing high EPC-rated property into one’s portfolio. Lenders offer discounts on both rates and fees for properties achieving the highest EPC rating of C or above. As the units were new build most of the flats were at EPC B and this allowed us to secure a discount on the lender’s rate of interest and also their arrangement fee, saving our client a considerable amount of money.
Rent to Loan Requirements:
One of the challenges in acquiring a mortgage for such a significant property lies in meeting the stringent affordability requirements set by lenders. In this case, our client faced the challenge of ensuring that the potential rental income from the 56 flats satisfied the lender’s criteria. At Fox Davidson, we tackled this by souring funding that met the rent-to-loan calculation to achieve the loan required. The calculation was just below the lender’s requirements but once the EPC discount was applied the rent to loan calculation was achieved.
The Solution
Securing a buy-to-let mortgage for a freehold block of 56 flats required skilled negotiation and presentation of the merits of the case. Any lender lending on this block was opening themselves up to large exposure in a small area. We engaged in discussions with the chosen lender, emphasising the client’s experience as a professional property investor, the demand for housing for employees of large employers in the local area, and the stability of the investment. Our aim was to negotiate terms that not only met the immediate financing needs but also aligned with the client’s long-term investment strategy.
Success in Property Investment:
Our collective efforts culminated in success as we secured a substantial buy-to-let mortgage for our client, allowing them to proceed with the acquisition of the 56-flat freehold block. The lender recognized the value and potential of the investment, offering favourable terms that reflected the complexity and scale of the property.
Client Satisfaction and Future Endeavours:
Our client expressed satisfaction not only with the successful outcome but also with the personalised and expert guidance provided throughout the process. The positive experience has laid the foundation for a lasting partnership, reaffirming Fox Davidson as a trusted ally for professional property investors navigating the complexities of unique and substantial property acquisitions.
Conclusion:
Fox Davidson’s recent success in securing a buy-to-let mortgage for a professional property investor acquiring a 56-flat freehold block I Swindon underscores our commitment to specialisation in complex property transactions. Our ability to navigate the intricacies of freehold blocks of flats, collaborate with specialist buy-to-let lenders, and negotiate favourable terms sets us apart in the industry. We are proud to be a mortgage broker dedicated to facilitating investment excellence in the ever-evolving landscape of property financing. As we continue to specialise in complex property types, including freehold blocks of flats, we look forward to providing specialist solutions that empower our clients to achieve their ambitious property investment goals.
For more information visit our dedicated page on mortgages for freehold blocks of flats or do get in touch with one of our brokers. We secure mortgages on freehold blocks of flats across the UK.
Frequently asked questions
How is rental income assessed for a buy-to-let mortgage?
Lenders use the Interest Coverage Ratio (ICR), typically requiring rental income of 125 to 145 percent of mortgage interest at a stress rate. Higher-rate taxpayers in personal name usually work to 145 percent ICR; basic-rate taxpayers and limited company applications usually work to 125 percent.
What deposit do I need for a buy-to-let mortgage?
Standard buy-to-let mortgages require a minimum 25 percent deposit (75 percent LTV). Some specialist lenders go to 80 percent LTV. HMO and MUFB products typically cap at 75 percent LTV.
Should I buy through a limited company or personal name?
For higher-rate taxpayers building a portfolio, a limited company structure is usually more tax-efficient because mortgage interest is fully deductible against profit at corporation tax rates. Setup and accounting costs are higher, so the benefit is clearest from £200,000+ of gross BTL income.
How long does a buy-to-let mortgage take to complete?
A complete buy-to-let mortgage application typically takes four to seven weeks from application to drawdown. Limited company and portfolio cases sometimes take longer where the wider portfolio needs underwriting.
Completed transaction. This case study describes a live deal arranged by Fox Davidson. Client details are anonymised and figures rounded.
All rates and terms are indicative and subject to individual assessment, lender criteria and property valuation. Your home may be repossessed if you do not keep up repayments on a mortgage.
Buy-to-let, HMO, MUFB, and serviced accommodation finance. Specialist landlord broker.