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Unique Mortgage Product for Purchasing Below Market Portfolios

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Unique Mortgage Product for Purchasing Below Market Porfolios

A new product has been launched by Shawbrook Bank aimed at helping the Professional Investor to acquire portfolios from landlords who are looking to sell because of the tax changes or simply looking to retire. 

The product is unique in that it can allow the purchaser to acquire the portfolio with a deposit as little as 10% of the purchase price, subject to the loan to value being 75% or less. 

Excluding bridging finance lenders, we are unaware of a single BTL lender that will lend on this basis. This is because BTL lenders will always take the lower of the purchase price or valuation as the basis for assessing how much to lend. Even if the investor buys a property at below market value, the basis for the loan will be the purchase price and therefore the investor will still need to find a 20% or 25% deposit. 

There are some bridging finance lenders that would lend on the value of a property and ignore the purchase price and these lenders can be useful on below market transactions. However, whenever I have come across these scenarios, the cost of bridging the purchase including fees and interest cost can often add up to 10% of the purchase price. This means the discount the investor is obtaining from the vendor is then actually being lost by using bridging finance!  

 Shawbrook’s new mortgage product allows the investor to go straight onto a long term BTL for residential properties (including HMOs) subsequently avoiding the bridging finance stage and reducing costs. 

The key criteria is 
  • Minimum portfolio value £1.25 million 
  • Interest rates from 3.35%+ libor 
  • Terms up to 30 years 
  • Experienced investors only and properties that are in a lettable condition or tenanted 
Example 

A landlord is looking to sell a portfolio of high yielding properties at a discount. The purpose being to save agents fees and to have the sale completed in one quick transaction rather than having the hassle of selling the properties over many months to multiple vendors 

Purchase price £1,225,000  
Valuation £1,450,000  
Rental income £145,000 per annum 
Mortgage £1,087,500 (75% of the value) 
Deposit £137,500 (11% of the purchase price) 

 

How we can help you

The landlord would save significant agent and legal fees by transacting the sale as one portfolio and obtain the funds much quicker. The investor purchasing this portfolio has a lower deposit and the return on investment is huge. In less than 2 years the rent achieved after deducting the mortgage payments has repaid the initial deposit. 

Contact us now if you think these product enhancements could benefit you! 

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