Buy-to-let encompasses a multitude of different loan types from straightforward single residential property deals, to houses in multiple occupation, multi units on one title, lending to limited companies, semi-commercial units, properties occupied by DWP tenants and so forth.
There is a bit more work involved in the more complex cases, but the good news is that there is usually a significantly higher procuration fee on offer, often double that of a standard mortgage proc fee.
Take, for example, a deal we completed recently in which a broker based in North London wanted to help a client remortgage so that they could release equity in order to purchase further buy-to let properties.
The property to be mortgaged was a freehold unit consisting of three flats on one title, generating an annual rent of £70,000 between them. The value of the property as a single freehold was £1.4m and the client was seeking an advance of £1.1m.
A traditional valuation method, based on the property having a single title, resulted in a £1.4m estimate. An alternative approach, however, was to base the valuation on the assumption that each unit could be sold separately. Would that be acceptable to a lender? Yes, providing that the lender was comfortable that there was a genuine market for each unit to be sold not just to investors, but to ordinary homeowners.
In this particular instance, the lender, Shawbrook Bank, was willing to lend over a 10-year term on an interest-only basis, at a rate of 4.95%. The Bank asked the valuer to confirm that the title could be split into three long leaseholds if there was a need to do so in the future. By valuing the property on this basis, the aggregate value of all three units was £1.75m, which represented a significant uplift.
In truth, this deal required little extra input from the broker. 3mc was able to work with Shawbrook to construct a deal that worked for the broker’s client. The broker received a procuration fee of 0.75% (£8,250) and, in addition, was also able to charge his client a broker fee.
With thanks to 3mc and Shawbrook Bank
