In a rising interest rate environment, it can be time-consuming and stressful to manage your mortgage needs. This is particularly apparent if you own more than one home or investment property at a time when the UK Bank of England base rate is at a 14-year high of 4.5%.
If you are looking to buy or re-mortgage additional homes, we may be able provide one loan across your portfolio if the properties are for the same purpose, such as residential or buy-to-let. This may boost the efficiency and affordability of your repayments. Here, Investec Private Bankers Lisa Parkes and Carlos Mendes explain more about our holistic approach to mortgage lending.
Second homes: owner-occupied mortgages
If you have a main residence and are looking to purchase or re-mortgage a second home, it may be possible to have one loan secured across both properties. While the solution is not commonly offered by mainstream lenders, a specialist bank like Investec can help.
“The main benefit is that if you combine the equity in both properties, you may be able to lower the loan-to-value (LTV) of your mortgage, which could help you achieve a lower interest rate bracket and reduce your monthly repayments,” explains Private Banker Carlos Mendes.
To ensure the solution is affordable, Investec will look at your income profile overall. “Our approach to lending is bespoke, but we will consider a wide range of income such as discretionary and deferred pay, foreign currency and a proportion of vested and unvested stock,” says Carlos. “As with all of our mortgages, we can also look to align your repayments with your cash flow.”
Working with one lender could also save you time. “Having less banks or individuals in the process is often more efficient,” says Carlos. “It equips you with the transparency of repaying one mortgage, at a time when the economic environment is changing rapidly.”
There are some scenarios in which one mortgage for multiple homes might not be appropriate. For example, if properties are owned in different names by a couple or if exiting an existing agreement early would incur a significant early repayment charge or expose you to higher interest rates unnecessarily.
“The solution is likely to be most suitable for those who need a new mortgage to buy an additional residence, or those who are reaching the end of an existing term. However, some of our clients with short-term mortgages may still opt to simplify their borrowing by having one repayment plan,” adds Carlos.
Separate valuations and due diligence are still required for each property. This can be supported by dual representation, with the same legal firm acting for both you and Investec, to improve communication.
This type of mortgage agreement would also need to be carefully considered, as the Bank would be able to enforce its security over any relevant mortgaged property in the event of an enforcement event.
Your private banker can help you manage the process. “As private bankers, we will explore all borrowing options transparently and, on a case-by-case basis,” says Carlos. “We’re here to save you time and convene the support you need across borrowing, transactional banking and foreign exchange, as your needs change.”
The solution is likely to be most suitable for those who need a new mortgage to buy an additional residence, or those who are reaching the end of an existing term.
Case study: Helping a couple buy a second home
A couple who worked in the technology sector were already clients of Investec private bank when they approached us to buy a second home outside of London. One of them was an entrepreneur earning a salary and dividend and the other was a salaried consultant.
The clients wanted to purchase a seven-bedroom property in Leicester while retaining their existing home in London which had its own mortgage.
While there was the option to withdraw funds from a business to part-finance the new purchase, the couple’s preference was to leave their capital invested and take a mortgage over both properties.
Many of our clients have complex income structures. In this instance, by looking carefully at the couple’s salaried income, a proportion of the entrepreneur’s dividend income and a proportion of buy-to-let income, we were able to provide a mortgage of £1m. The second property was used as additional security and the LTV was 69%. The mortgage had a 24-year-term, which was the length of the previous mortgage on their main home, and the couple opted for a two-year fixed rate on the new loan. They are now the owners of two properties and live comfortably between their hometown and the city where the business is based.
Property portfolios: buy-to-let mortgages
If you own multiple buy-to-let properties, you may be able to use one mortgage to fund your portfolio. “This is most appropriate for individuals whose properties are owned within a holding company, such as a trust or Special Purpose Vehicle,” says Private Banker Lisa Parkes, who works exclusively with property investors.
“The benefit is efficiency; we can create one tailored repayment plan that reflects your income and helps you manage your cash flow. You will also have clear visibility over your mortgage terms and timeline which can give you peace of mind in a changing economic environment and save you time.”
To determine affordability, Investec private bankers look beyond rental yield. “We understand that current rental yields may no longer be sufficient to service debt in the current climate, and we take a holistic view of your income and assets to provide an appropriate loan size,” says Lisa.
Lisa is currently working with an investor who wants greater certainty over their costs. “The client has four mortgages on a variable interest rate. With base rates expected to rise further, we are due to provide one loan secured against all properties on a fixed rate to give them greater visibility and control over their balance sheet.”
Investec offers a fixed-rate on its buy-to-let mortgages, independent of the loan-to-value ratio, and therefore you should consider if it’s the most cost-effective solution for your needs.
“Managing costs is front-of-mind with many property investors we work with, who are exploring selling their investments; fixing interest rates and re-mortgaging,” says Lisa. “In the recent example, the client was also able to reduce their monthly repayments by simplifying their mortgage. However, this may not always be the case. We can help explore the advantages and disadvantages carefully.”
Juggling multiple mortgages? Speak to our team about how to fund more than one property, today.
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.