Our client was a Buy-to-Let landlord and developer with multiple properties on attractive legacy rates, secured before the financial crash. He was looking to access the equity without losing the favourable rates.

Loan Type :  Bridging Finance / Equity Release / 2nd Charge Bridging / Revolving Credit Facility / Development Finance

Property Value : £9.5m

Loan Size : £3m

Loan to Value : 65% (total exposure, including 1st charge)

The Situation

Our client owns more than 100 BTL properties with the average gearing across them at around 60%. A small selection of his portfolio (11 properties with a value of £9.5m) were geared much lower (circa 35% with a debt of £ 3.2m) and he wished to utilise the equity to buy or develop more property.

All the properties were let, were in a good state of repair and had a good track record or minimal void periods, so finding a lender should have been relatively easy.

The Challenge

The challenge was that most of these mortgages were taken prior to the financial crash, and therefore the low standard variable rates that were prevalent at the time still applied. The rates were around 1% above BoE base rate, giving him a pay rate of 1.75%. New BTL mortgages, on 5-year fixed rates are at around 3.5%, which equated to an additional £55k per annum in interest charges just to replace the existing debt.

There was an opportunity cost to the client of not being able to access his equity, but there was also a real financial cost in releasing this money without any definite projects in mind.

The Outcome

We were able to arrange a bespoke Revolving Credit Facility, secured on a 2nd charge basis across the 11 properties. This gave the client certainty of access to the money when he needed it for other projects, but also meant he didn’t lose the low cost of the finance on his existing mortgages.

The client eventually used most of the facility as a deposit on a new development scheme. We used the same bank to secure the Development Finance and used the 2nd Charge Facility for the deposit, instead of cash. A true, 100% cashless deal.

The loan was a 3-year term, with a rate of 8% on drawn funds.