Using an existing BTL portfolio to raise capital

Posted on 10 February 2011 by benighil


My husband (American) and I (French) own 4 properties in London worth about £4m,the mortgage remaining is about £2.2m. We would like to raise capital to acquire more buy to let properties by releasing equity on those 4 existing flats.

Our monthly mortgage repayment on those 4 flats is £4,200 pounds, interest only and all the flats are let for £11,000 a month. My husband, employee, makes about £20k a month, in the USA we own 2 flats which are let for £2500 a month and the mortgage on those two properties is about £6000 a month , so total income is £33,500 and total expenses £10,200. Apart from those properties ,we own shares worth about £270k. We have contacted our first mortgagee bank (RBS) and they have approved a second charge being taken out on our four existing properties.

So what we are looking to do now is to give a second mortgage charge to another bank (BANK NO. 2). Then on the strength of that equity under charge, we would like to buy a fifth property with a mortgage loan from BANK NO. 2. So then BANK NO. 2 would hold a second mortgage charge on our four existing flats and a first mortgage charge on the fifth property. Under this scenario, the actual loan from BANK NO. 2 would be for the full amount of the fifth property, but would be collateralized by the second charge against our four existing properties and the first charge against our fifth property to be bought.

The fifth property has not yet been identified. We would like first for Charcol to find a bank willing to give us approval in principle and a ceiling loan amount, subject to approval of loan documents, property valuations, etc.

Benighil,

Whether or not this is possible will depend on the amount of equity left on your 4 London flats taking into account the additional borrowing from RBS. As you are probably aware the number of Buy to Let mortgages providers has shrunk in recent years and the amount of deposit they require has increased.

This is further complicated by the fact that you are not going to be investing any personal stake in the new property and this cuts down the number of available Lenders even further.

That said, I believe you would benefit from speaking to one of our independent mortgage advisers. They will be able to look at your situation and then research the specialist private lenders as you wish.

Peter

Answers provided in response to Ask the experts are based on the information provided and do not constitute advice under the Financial Services & Markets Act. They reflect the personal views of the authors and do not necessarily represent the views, positions, strategies or opinions of John Charcol. All comments are made in good faith, and John Charcol will not accept liability for them.

We recommend you seek professional advice with regard to any of these topics where appropriate.

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