The Client
The clients are both portfolio landlords. The husband owns 14 buy-to-lets and the wife owns 12. Both have good credit and earnings, and they also own their own residential property.
The Scenario
The wife owns a buy-to-let flat in her name only, but the clients wanted to add the husband onto the mortgage so it would be jointly owned. As part of the process, they were looking to release capital to extend the lease, which was currently far too short, and also to purchase the freehold of the property.
The block consisted of two flats in a converted terraced house, and there was a lot to consider. The first was the number of properties the clients already owned between them, since some lenders cap how many properties an individual or couple can hold, as well as the overall loan-to-value and rental stress coverage across the whole portfolio.
The second consideration was the lease itself. Once a lease becomes too short, both the value and re-saleability of the property drop drastically. We also needed a lender willing to add the husband onto the mortgage as part of the transaction. Finally, there was the exposure within the block, given 50% ownership of it, and the freehold purchase itself, since most lenders will not allow the freehold to be owned under the same name as the leasehold within the same block.
The Solution
As a whole-of-market broker, we know that some lenders apply no overall portfolio limits and place no restrictions on ownership, loan-to-value or overall rental stress. We also work with lenders willing to underwrite an application on a property with a very short lease, provided it is added as a condition of the offer that the lease will be extended on completion, using the funds raised as intended.
Most lenders are comfortable with a transfer of equity to add someone onto a mortgage as part of a transaction, and this is largely handled by the solicitors involved. Different lenders apply different caps on the percentage of a block an applicant can own – some set this at 25%, others 33%, and others 50%. In this case, we needed a lender comfortable with half ownership of a single block.
The final piece was the freehold. This can be tricky, since lenders generally do not like a leasehold flat to be owned under the same legal entity as the freehold. The way around this was to have the clients purchase the freehold through a limited company, creating enough legal separation between the two.
Summary
It is possible to achieve an outcome with this many moving parts and challenges. It comes down to knowing the lenders and having genuine experience navigating their individual criteria.
Frequently Asked Questions
Do lenders limit how many buy-to-let properties a portfolio landlord can own?
Some lenders do apply overall portfolio limits, but others do not.
Working with a broker who knows which lenders place no restriction on portfolio size, loan-to-value or overall rental stress makes a significant difference for larger landlords.
Can I remortgage a flat with a very short lease?
Yes, some lenders will still underwrite an application, provided extending the lease is made a condition of the offer.
This typically means the funds raised are used specifically to extend the lease as part of completing the mortgage.
Can I add someone to my buy-to-let mortgage through a transfer of equity?
Yes, most lenders are comfortable with this, and it is largely handled by solicitors as part of the transaction.
This is a common way for a property held in one name to become jointly owned without a full remortgage or new purchase.
Can I own both the freehold and leasehold in the same block of flats?
Most lenders will not allow the freehold and leasehold to be owned under the same legal entity.
Purchasing the freehold through a separate legal entity, such as a limited company, is a common way to create the separation lenders require.
Commercial Finance Network is a whole-of-market FCA authorised commercial finance broker working with property investors, developers, and businesses across the UK and internationally. We work across the full specialist buy-to-let panel and will tell you which lenders will engage with your deal, what LTV and rate to expect, and how to structure the application before anything is submitted.
Commercial Finance Network is directly authorised and regulated by the Financial Conduct Authority. Your property may be repossessed if you do not keep up repayments on a loan secured against it. Buy-to-let and business-purpose lending secured against investment property is not regulated by the Financial Conduct Authority.
Call us on +44 1494 622 111 or email info@cfnuk.com to speak to a specialist directly.
Related Pages
- Buy-to-Let Mortgages – whole-of-market advice for portfolio landlords across the UK
- Buy-to-Let Mortgage Calculator – estimate borrowing and monthly costs before you apply
- Commercial Finance – whole-of-market funding for businesses and property investors