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Shawbrook helps investor with £3.35m refinance on nine HMOs

Shawbrook partnered with Sirius Property Finance to help an experienced investor remortgage nine HMO properties worth £3.35m.

The properties were purchased using bridging finance in June 2018, however as the term was coming to an end the client wished to remortgage quickly to avoid any fees.

Robert Collins, co-founder of Sirius Property Finance, said: “Along the way we had to liaise with the valuer to have the original reports readdressed and to clarify the net rental position as they had originally used a 20% discount that affected affordability.

“However, due to the partnership between me, the client and the team at Shawbrook we were able to provide a solution within the short time frame. It was a fantastic team effort and I’m delighted that our partnership with Shawbrook had a positive outcome for the client.”

Peter Turner, senior development manager for Shawbrook Commercial Mortgages, added: “The turnaround on this case was tight but the teams from both Sirius and Shawbrook worked together to re-mortgage the nine HMOs of the customer, avoiding the bridging finance penalties.

“I’m delighted we were able to help with this case and look forward to continue working with our newest strategic partner.”

Using Shawbrook’s LRI2 product on a 10-year, interest-only term, the team worked with Sirius to ensure the deal was completed in time.

The AIP was submitted on 6 November and the case was completed before Christmas ensuring that the bridging finance was repaid within the term and allowing the client to avoid over-run penalties.

Source: Mortgage Introducer

HMO finance
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HMO properties continue to deliver superior yields

HMO properties produced the highest yields in 2017, at 8.9 per cent – according to the latest buy-to-let index from Mortgages for Business.

But while this looks like an attractive investment for landlords, Mortgages for Business points out that yields on this type of property have fallen over the past year.

This is the first time since their Complete Buy To Let Index launched in 2011, that average yields on HMO property have been below 9 per cent.

Yields on multi-units, such as blocks of flats came a close second in 2017, generating an average yield of 8.1 per cent. This was also down on the previous year, where  yields were 8.3 per cent.

In contrast yields on ‘vanilla’ buy-to-let properties generated a lower but more consistent 5.6 per cent return in 2017.

Mortgages for Business sales director Jeni Browne says: “The attractiveness of HMOs as a buy-to-let investment has increased in recent years, not only because of the higher yields on offer but because serious investors are keener to diversify their portfolios.

“With more landlords vying for these properties, prices have been pushed up more quickly than the rents, which is one of the main reasons we are seeing yields drop.”

She added that the fact fewer new HMO licences were granted may also be having an impact.

The average value of a vanilla buy-to-let property was £305,283 in 2017, a 19 per cent decrease on average values in 2016 (£375,409) according this data.

Browne says this indicates that landlords are seeking lower value properties. She adds  anecdotal evidence suggests landlords are increasingly looking further north to purchase buy-to-let properties.

Browne says the benefits of this strategy include paying less stamp duty, future capital growth and scope for rental increases which may allow for slightly higher yields.

Whilst there was no change in the number of lenders operating in the sector in Q4 2017, the number of buy-to-let products in the market continued to rise.

Mortgages for Business says there has been a 444 per cent increase in the number of since 2011.

Browne adds: “It is widely anticipated that buy-to-let lending will contract this year in response to the tax and regulatory measures being imposed on the sector. I would expect product number to peak in Q1 2018, and we have already seen some lenders trimming their ranges leaving a core of products designed to reflect the changing needs of landlords.”

Source: Mortgage Strategy