In early 2017, new regulations from the Prudential Regulation Authority (PRA) come into force which will tighten the rules on affordability around Buy to Lets. In preparation for this lenders are already beginning to tighten their criteria though the rules are still flexible for the time being.
Here are some recent examples where second charges have helped our BTL clients.
Our first case study seems very apt given return of a certain reality TV series involving 12 celebrities living in the Australian Jungle.
Our client was living and working in Australia with a BTL property in this country but little credit history in the UK. His BTL property had a mortgage on an interest-only basis secured on it and he was looking to raise further interest only funds to purchase another property in Australia.
Unfortunately, the broker could not do this on a mortgage basis. However, the case was no Bushtucker Trial for us as we were able to complete an interest only second charge relying only on the rental income for affordability.
2. Repairing property damaged by tenants / inexperienced landlords
In this case study the client had previously evicted the tenants who had left the property in an uninhabitable condition after ripping out the kitchen and bathroom. A remortgage was not available. The landlord required funds to repair the damage and re-let it but they were relatively inexperienced with limited provable income and a patchy credit history.
The Promise Money team was able to complete a short term second charge bridging loan to complete the repairs with a second charge loan exit a couple of months later. Affordability was satisfied by way of the proposed rental income. A job well done.
3. Expand BTL portfolio with no deposit
The client in this scenario was looking to increase his BTL portfolio but had no finance available to fund the deposit needed. He needed to release some equity out of his portfolio. Unfortunately his existing mortgages all had high early repayment charges.
Promise were able to raise the deposit by placing second charges on several properties in his portfolio which allowed him to raise the funds to expand.
4. Debt consolidation on a BTL
The client wanted to raise some money for debt consolidation purposes against a BTL. However the rental income didn’t cover the mortgage payment and there was some adverse credit in the background.
Promise were able to raise the full amount needed through a second charge which assessed affordability by taking into account both his rental and earned income. The debts were consolidated and the clients objectives met.