Case study: Buy-to-let for entrepreneur with limited income

The borrower

The client had set-up a Special Purpose Vehicle (SPV) for their real estate investments. The SPV was held within a holding company, of which the client was the ultimate beneficial owner (UBO).

There were several other companies within the holding company which provided products and services that supported property development. The client had been self-employed for their whole working life.

The problem

The client was looking to buy a 12-bedroom, Grade-II listed property in Essex as a buy-to-let. However, the property required some maintenance work and an EPC rating upgrade (from F to E) before it could be legally let.

To contribute to the purchase, the client also needed to borrow against his existing property portfolio held within the same holding company.

As the client chose to take a limited income from his business and held a small amount of liquidity in the UK, the loan repayments could not be comfortably serviced from personal income. This meant Investec had to consider the impact of any void periods on mortgage affordability.

The solution

Investec had to carry out a detailed analysis on the liquidity of the four businesses within the holding company to evidence serviceability should there be rental void periods. We were able to consider the proceeds from a development project undertaken by one of those businesses, to provide an alternative source of future income. The client was also required to hold 12 months’ mortgage interest payments upfront.

We provided a 55% LTV mortgage for 15 years on an interest-only basis. The first five years were on a fixed rate and years 5-15 on a reversion rate.
 

Important information

Your property may be repossessed if you do not keep up repayments on your mortgage. Investec residential mortgages are only available for residential properties in England or Wales and are primarily available to UK residents and subject to eligibility.