Our client, an experienced landlord, needed to refinance a semi-commercial property to improve cashflow and raise capital. Discover how we overcame challenges around mixed-use and private occupancy, securing an interest-only facility and saving the clients £115,000 over 5 years.
At a glance:
- Remortgage of complex semi-commercial property
- Annual saving of £23,000, and £115,000 over 5 years with a new lower mortgage interest rate
- Capital raised for future investment and home improvements
The case
Our clients, experienced property investors, owned a diverse portfolio of 18 properties, including flats, houses, and a commercial unit. Part of the portfolio was personally owned, while some properties were owned by their Limited Company. As high-net-worth individuals, they wanted to improve their cash flow and secure additional funds for future investments and renovations.
Having previously financed several properties with us during the pandemic, we could see that their existing mortgage was on a capital and interest repayment basis at 8.35%. To their frustration, the existing lender was unwilling to switch to an interest-only facility, despite offering such terms to new customers.
The challenges
The property in question was a semi-commercial complex in the south of England. It included two commercial units, a restaurant and an entertainment venue that they let to third parties, seven flats, and one house. Six residential units were let to tenants, while two were used as private residences by our clients and their close family. The whole complex was owned in our client’s personal name.
This mixed-use setup, particularly the partial private occupancy, posed a challenge when sourcing finance. Our clients required an interest-only mortgage to ease cashflow pressures, a competitive rate to replace their existing high-interest repayment mortgage, and a lender willing to accept that part of the property was being used as their personal residence.
After reviewing options with four commercial lenders, three declined the application due to the private use of two residential units. Many lenders require full investment use for such properties, significantly narrowing the available options. Despite this, we continued exploring the market and identified a newly onboarded lender willing to accept up to 25% private use within the property.
Ultimately, this flexibility was key to unlocking the deal and securing the terms the clients needed: a more competitive interest-only facility that improved their cash flow. We unlocked over £23,000 in annual savings and £115,000 over the five-year mortgage term.
MFB's perseverance and market knowledge have put our clients in a great position to invest in more properties, and we’re now assisting them in raising capital from a previously unencumbered property to help with this.
Finance
Property value: £2,800,000
Loan amount: £1,265,000
LTV: 45%
Interest rate: 6.52%
Monthly mortgage payment: £7,010
Lender arrangement fee: 2% (£25,300)
Loan term: 5 years, interest-only
Next steps
Looking for a commercial mortgage? Get in touch with our team to see how we can help.
