The removal of tax breaks for landlords last year was predicted to result in a sharp reduction in buy-to-let lending. However there is evidence some lenders are loosening up criteria to help landlords. Harry Landy of Enterprise explains how specialised BTL lending can help your clients.
Many lenders will not consider buy-to-let mortgage applications from clients whose circumstances are less-than straightforward. That is when you need to consider a complex buy-to-let mortgage.
At Enterprise our buy to let lending department is a complex BTL department. Quite simply, we don’t cater for mainstream buy-to-let clients.
Complex BTL mortgages can be used for both residential or commercial property – or sometimes a mixture of the two, known as semi-commercial.
Examples of properties that qualify for complex BTL lending finance include student lets, houses in multiple occupation (HMO), or multi-unit properties on one title deed.
For example we work with a lot of limited companies - both UK and offshore - that want to buy and develop these types of UK property as an investment.
Other buy to let clients who cannot get more mainstream loans, and who we at Enterprise help, include expats and foreign investors.
Houses of multiple occupation (HMO) are an interesting case. They are difficult for high street lenders to deal with but HMO properties offer clients a way of maximising their property investment.
If a landlord has a four-bed house let out to a family and the dad loses his job then the landlord faces a rental void. But if, instead, that same property was set-up to be rented as an HMO - requiring a complex BTL mortgage - then the landlord could afford the odd rental void and still keep up their mortgage payments, as more than one rental income is being received on the property.
Complex BTL also allow clients to buy on a semi-commercial basis. You may have a situation where someone buys the freehold, for example a shop and flat, and let both to different people.
We also lend on more unusual types of construction, such as property with a steel frame or concrete construction which mainstream lenders avoid.
This would include properties such as high-rise ex local authority properties that can be 15 or 20 stories, again with huge potential for rental yield in some parts of the UK.
High rise flats in a city centre may not be straightforward enough for a mainstream BLT lender but often the views mean the rental demand are very strong.
Some High Street BTL lenders have certain restrictions. These would include how many properties an investor can borrow on, or the total value of their portfolio. Conversely, for the specialist lenders we work with, the larger the portfolio a landlord has, the more interested we are to lend.
As with mainstream lending, complex BTL is subject to the same PRA rules of capital adequacy; the only difference being that they are often lending to commercial entities where the rental yield will be higher.
We have nurtured relationships with lenders who take a pragmatic view of BTL lending, and that is why we can offer clients the type of finance that meets their more complex needs.
