Cross charge allows client to raise £4.245 million loan
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Our client is a self-employed Director of four companies who was looking to buy a new main residence. He wanted to keep his existing home as a buy to let property and raise capital from this property to help fund his new home. Added to this, our client owned three additional buy to let properties which he was also looking leverage to raise funds for the deposit towards his new home.
In total, the portfolio existed of four properties, making the client a portfolio landlord in the eyes of the Bank of England’s Prudential Regulation Authority (PRA). Since 2017, new rules have existed which place stricter stress tests on borrowing across property portfolios. Therefore, if we had individually re-mortgaged these properties, the stress test calculations would have restricted the borrowing required. (For more information on the PRA regulations, take a look at our mortgage guide for portfolio landlords).
We approached a private bank that was able to take into consideration the client’s position and agree to a cross charge across his four properties at 60% LTV combined on an interest only basis. This allowed the client to secure his £4.245 million loan and purchase his dream home.
|Rate:||4% variable rate|
|APRC:||Overall cost for comparison 4.60% APRC representative variable|
|Loan purpose:||Residential Purchase / Remortgage of 3 Buy to Let properties
|Lender’s arrangement fee:||1% of loan amount|
|Early repayment charge:||None|
This case study is for information and illustration purposes only. It is not an offer, or suggestion of an offer. Each mortgage case is assessed on an individual basis and there is no guarantee that the solution described here can be repeated in the future.
Please note that this specific deal may not be available to – or suitable for – all customers, dependent on their individual circumstances. The rate quoted may become out of date at short notice and may not be available at the point at which customers enquire about it. This document may not contain all the information needed for customers to make a decision and they should seek advice.
Overall cost for comparison 4.60% APRC representative variable based on 70 payments at the lenders variable rate of 3.50% above the BOE rate of 0.5%, giving a payable rate of 4.0% and the lenders fees. Because all, or part of, the mortgage is currently, or will revert to a variable interest rate mortgage, the actual APRC could be different from this APRC and the payments could increase, if the interest rate of the loan changes. For example, if the interest rate rose to 13%, the APRC could increase to 14.4%. The actual rate available will depend on your circumstances. Ask for a personalised illustration.
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