Day rate contractor purchasing existing property via limited company to let out, enabling him to purchase new home without stamp duty surcharge

The client: Our client, a day rate contractor, wanted to let out his existing property, raise money and upsize to a new home. The issue was that our client would end up paying an extra 3 per cent stamp duty on the purchase of his new home, due to this being an additional property. As our client is a day rate contractor, we also needed a lender who would accept a fixed-term contract and payslips showing the client’s salary in the form of basic pay and commission payments.

After looking at the options, we advised our client to purchase the existing property from himself via a limited company; he could then let it out, raise money to buy the new property and avoid any additional stamp duty.

We therefore required a lender that would accept the client buying his existing property via a limited company, as well as the capital raise, and another lender to lend to a day rate contractor on the purchase of his new property.

Numerous lenders were sourced but this deal required specific criteria and took a lot of research to identify suitable lenders.

Key requirements: –

• A lender comfortable with the client buying his property via a limited company and raising money at the same time for the new purchase. • Another lender comfortable with lending to a day rate contractor on the new purchase.

After sourcing the mortgage market, we identified two lenders – one who would agree to a buy-to-let mortgage at 40 per cent LTV on the first property purchased by the limited company; and a second lender who would lend at 60 per cent LTV on the new property, basing affordability on the client’s fixed-term contract.

The application process: To support the mortgage application, the client supplied us with evidence of his fixed-term contract and income, as well as proof of identity. We were delighted to inform our client that both lenders had issued formal mortgage offers for the full amount requested.

Existing Property value: £495,000 Loan amount: £190,000 LTV: 40% Rate: 2.95 per cent fixed for two years (buy-to-let) Lender product fee: £2,100 Monthly payment: £467.08

New Property value: £1,030,000 Loan amount: £618,999 LTV: 60% Rate: 1.34 per cent fixed for five years Lender product fee: £1,016 Monthly payment: £2,429.34
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