£280,000 property refinance: the advantages of buying with cash
As an accountant, you will probably have some clients who are cash-rich. Being liquid can be a valuable asset in many sectors.
But what can you do if a client wants and needs to be a cash buyer to secure a bargain in the property market where costs are inevitably high - and yet has no cash to call on?
At Rangewell, our expertise can help you provide the solution - and both you and your client will benefit as a result.
We were recently approached by an accountant who had a number of clients in the residential Buy to Let sector. He had helped them ensure their businesses were on a sound footing, despite the recent changes in taxation, and one of them was keen to expand his property holding.
With the help of his accountant, he had built up a business based on a small residential portfolio funded with Buy to Let mortgages, and owned a number of flats and small houses in and around a major northern conurbation.
He recognised the opportunity presented by a run-down property near to his existing properties.
The property was a small house which had been standing empty. It was in poor condition, and most types of mortgage would be impossible until work was done to make it habitable, with refurbishment necessary to kitchen and bathrooms, and central heating installed.
The accountant saw that his client had no cash to call on.
"We first looked at a Bridging Loan, which can act as a short-term source of a high-level funding. Bridging Loans are high cost and intended to be repaid quickly, either by the sale of property or by refinancing to another product designed for the long-term, such as a mortgage.
My client was keen, but I advised him to be very wary of entering into this type of arrangement without a clear exit route - and turned to Rangewell for help."
Working with the accountant to find a solution
We worked closely with the accountant and saw that the client’s existing property portfolio could provide the answer.
We set about securing a refinance arrangement.
In simple terms, any Commercial Mortgage is a loan secured on your property assets. This security means that the risk to the lender is small, and so the interest rate they charge can be reduced. This means that the costs involved with a Commercial Mortgage can be among the lowest cost lending types available. So, to raise cash for virtually any purpose, a Commercial Mortgage can be the most cost-effective solution, especially with the current low interest rates and high property values.
In the case of the accountant’s client, we worked with a specialist mortgage lender who could provide a new mortgage for his entire BTL property holding. This was currently mortgaged with a number of lenders but with some of the mortgages having been in place for 10 years, we saw that, thanks to property price inflation, there would be sufficient equity to release to cover the new property.
We found a major commercial lender who was able to cover the entire existing portfolio with an interest-only mortgage at just 2% above base rate.
Not only would this reduce the client's monthly repayments overall, it would also allow the client to release £280,000 in cash - reflecting the growth in house prices his portfolio had enjoyed. This was more than enough to buy the house he wanted and to fund the work required.
The accountant’s client was able to buy the property at a substantial discount thanks to his cash buyer status, and to cover the work required. With a new tenancy now agreed, the property has already begun to bring him in an additional income stream.
Do you have clients in need of large-scale finance for buy to let property and other deals? The simple answer is to call us at Rangewell. We have specialist teams working with accountancy professionals such as yourself and we can help you find the solutions your clients need for virtually any financial need.
We make no charge to you or your clients. In fact, we can support your efforts with a contribution from any commission that might be generated, and our services are free to you and your clients.