We were approached by a broker whose client—a primary school teacher from Manchester, was looking to raise capital on an unencumbered flat she was due to inherit from her mother who had passed away. The flat has two bedrooms, and is in a former Local Authority block of four in Stockport.
Whilst waiting for probate to go through the client had begun renting the property out to tenants, but with the process nearing completion, the client was keen to refinance the property onto a buy to let mortgage to release capital.
On the advice of her accountant, she had opted to take a mortgage in her personal name, and she planned to use the capital raised to invest in further buy to let properties. There were several challenges with this case which meant that finding a suitable lender would be restricted to just a few options:
1. This is the clients first buy to let
2. Construction of the property is unusual (classed as Cornish type 1)
3. The property is ex-local authority
Cornish property types 1 and 2 were declared defective under the Housing Defects Act in 1984, after it was discovered that the concrete used tends corrode the reinforcement and can deteriorate over time. Some specialist lenders will consider lending against this type of property but only if it has a Pre-cast Reinforced Concrete certificate which confirms that the property has undergone licensed, structural repair, including replacing PRC components with traditional cavity wall construction.
The client did not have a PRC certificate and was not willing to consider one because they are expensive to get and, an intrusive, survey must be performed even if all necessary works have already been carried out. It should also be noted that some mainstream lenders would also require the whole block to have a PRC certificate.
Taking all of the above into consideration the broker approached Keystone Property Finance as it takes a manual approach to underwriting.
After assessing the case an offer was made with a product from the Solutions Range largely because the property was in a strong rental location and the loan to value was quite small.
Property value: £95,000
Loan agreed: £33,000
Product: Solutions Range
Rate: 6.89% term tracker
Term: 15 years interest only
Lender arrangement fee: 3% (£990)
Rental income: £525 pcm
Mortgage payment: £195 pcm
Gross yield: 6.6% pa
Broker proc fee: 1% (£330)