Expanding an HMO Portfolio Through a Ltd Company

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When our client made their initial enquiry, they already had two HMO Mortgages to their name and had recently purchased a further HMO property through a newly formed limited company.

For the first limited company purchase, they had chosen to use their existing lender as they had a relationship with them. However, this turned out not to be the most suitable option for this investment.

The Property

The new property was a mid-terraced house that was to be used as a five-bed HMO located just outside a city centre. It benefited from strong transport links to both the city itself and a nearby university.

Given the desirable location and the property being in a good state of repair, our client was confident that keeping it fully occupied for the majority of the time wouldn’t be an issue. This keeps the risk of rental voids to a minimum.

The Finance

An HMO mortgage was required to fund the purchase. As they were buying through a limited company entity we had to choose a lender that would allow this. Of course, the client wanted the best rate possible and decided that a five-year fixed rate was the best course of action.

They also wanted a lender who would complete fairly quickly as this meant gains on their investment would begin sooner rather than later. We were informed that this wasn’t possible with the previous lender who had become slow and difficult to deal with.

The Challenge

There were several factors involved that meant finding the perfect lender to match the client’s needs was challenging. Our client is a professional sportsperson meaning their employment is based on a fixed term contract of usually one year. In this profession, it can be common to change employers at the end of the contract but, of course, nothing is guaranteed. We needed a lender to take a sensible view on this.

Also, our client had historic adverse credit due to a disputed account. Although an agreement had been made and the account partially settled, the adverse credit was still shown on the file. Even with an explanation and evidence to show why there was a dispute, some lenders declined to lend based on both this and the employment, even though proof of a high income going back over five years was offered.

Given the earned income, the plan was to build the portfolio quickly with little fuss obtaining funding. We placed the client in contact with a specialist lender who had no issues with the adverse credit or the type of employment as they felt the overall application was strong. Furthermore, if our client wanted to purchase additional properties, this could be done easily and there was no limit to the number of HMOs they would fund for one applicant.

Finance Terms

  • Loan Amount – £112,500
  • Property Valuation – £150,000
  • Interest Rate – 4.85%
  • Loan Term – 10 years
  • Monthly Payment – £530
  • Repayment Method – Interest Only
  • Lender Arrangement Fee – 1.5%

About The Author

Lee has built a wealth of knowledge and expertise within the commercial finance sector and has sat on the family management team since 2007. His knowledge of the complex residential investment market led to our growth in the HMO and commercial property investment markets. Lee combines his work on HMO and complex investment properties alongside his work in the bridging loan, commercial mortgage and development finance markets.

Lee Hemming CeMAP  -  
Sales Director

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