I recently worked with a client who had been very badly advised by her previous broker and consequently needed to restructure buy-to-let finance and exit bridge loan that was proving very expensive.
The client, who was 64 years old, had recently bought a buy to let property with her daughter in Clapham as an investment. The property was worth £500,000, of which they had borrowed £400,000. Between the two of them they were having to pay £2,700 towards their mortgage each month, a sum that was crippling them, as well quarterly fees and charges – once totalled these equalled an enormous rate of 26% each year and they desperately needed to reduce monthly mortgage payments!
My client came out of retirement a year ago and was now self-employed and this meant that her options were very constricted. Her daughter’s income alone was not sufficient to pay the mortgage so she and her daughter had been advised to take out a bridging loan so that they did not miss the opportunity of purchasing the flat. The vendor was in a hurry to sell the property so my client committed to the bridging loan without fully considering the payment structure and her affordability to sustain these monthly mortgage payments on a buy to let.
My client did, however, have an unencumbered property in the same area, in which she lived which I thought may be able to be used as leverage and to reduce monthly mortgage payments.
I spoke to one lender who I managed to persuade to consider the primary residence as collateral against the second. We raised £100,000 against that unencumbered property at a rate of 2.09% and in doing so cleared £100,000 against the buy to let in an effort to reduce monthly mortgage payments.
After this we structured a remortgage against the remaining £300,000 on the buy to let property at a rate of 2.49% interest-only.
This left my client with a new monthly mortgage payment of just £800 – this allowed her to exit this unsustainable bridging loan and significantly reduce monthly mortgage payments on the buy to let investment!