Scenario:
Refinancing a portfolio in the current market is no easy feat. Higher interest rates have resulted in lenders stress tests becoming more stringent. This has a huge impact on the loan amount that can be borrowed and makes refinancing very challenging. Our clients had spoken to their current lender who were unable to offer them a new deal when their fixed rate expired and they were facing a very high variable rate.
Challenges:
Their portfolio was valued at £10 million and included 3 different multi-unit blocks in London. These blocks were 3 -4 flats per building and were on one freehold title with no separate leases. This type of property is more complex to finance due to higher legal risks to the lender. Most lenders will require flats to be on separate leases however some can take a charge on the whole freehold. The rental income from these properties was also not sufficient to borrow the amount required to clear the existing debt with a shortfall of over £1 million.
Solution:
With multi-unit blocks, the typical option is a specialist lender who charge higher interest rates accordingly however our clients were extremely rate driven. They were looking for a more bespoke solution that could take into account their landlord experience and their high net worth. Magni Finance strives in thinking outside the box and on this occasion approached a private bank who could offer one loan secured on the whole portfolio which saves the hassle of applying to multiple lenders. The rate offered was lower than specialist buy to lenders and was further reduced by the clients ability to bring some additional cash to the bank.
Key figures:
Property value: £10 million
Loan amount: £3 million
LTV: 30%
Repayment type: Interest only
Product type: Tracker
Interest rate: 1.5% over base