Investment Property Accountants - WARR & CO

Investment Property Accountants

Property Investment - Funding Options

When investing into property, there is a multitude of different ways of funding a proposed purchase: -

• Cash purchase

• Buy to let mortgage

• Commercial funding

• Secured loans

Cash purchase

For those fortunate enough to have accumulated sufficient wealth, an outright cash purchase is certainly an option.

However, careful consideration should be given to cashflow requirements before committing cash to property as the asset is illiquid and, unlike other investments, cannot generally be partially encashed. Clearly equity may be released by way of mortgage but this will undoubtedly take time to complete.

Buy to let mortgage

Personal – A buy to let mortgage is a facility which from the outset will permit an individual to purchase or remortgage a property and let it out for investment purposes. The assessment of such mortgage applications is geared more towards the achievable rental income from the property, and lesser so the personal status of the applicant. However, a small number of lenders will look at personal income.

The debt accumulated under buy to let facilities does not usually compromise affordability of a main residential mortgage in the eyes of the underwriter.

A minimum deposit of typically 15% is sought, however, it is not uncommon for 20% or 25% deposits to be required, certainly in the present climate. The level of deposit for a specific purchase is often dictated by the rental assessment.

Limited Company – A number of lenders will allow investors to utilise the medium of a Limited Company to facilitate such purchases. These are essentially bordering on commercial facilities, albeit offering rates more in keeping with the buy to let mortgage market, which are less than those available on a strict commercial basis. Note, however, that the vast majority of such lenders require a Special Purpose Vehicle (SPV) to be utilised for these purchases, i.e. the Limited Company must be set up for this purpose or a change made to the trading activity of an existing company. The company’s Standard Industry Classification (SIC) code will also need to reflect this. This, therefore, precludes companies that are seeking to invest into property as a sideline to their main trade.

Buy to Let products (where the tenant is not related to the borrower) are not regulated by the Financial Services Authority.

Commercial funding

A commercial facility differs in a number of ways from a mortgage. For one, the underwriting is not just based upon your particular circumstances but is geared towards the business proposition overall, i.e. what are the likely results from approving it.

Rates that apply are based upon the strength of accounting information, the value and acceptability of security and the availability of personal guarantees.

We have engaged in effecting commercial loans on many occasions for property investors and/or developers. These offer more flexibility than a standard buy to let as, via a second charge, they allow you to tap into equity upon which another lender holds a first charge. Where a portfolio of properties is accumulated via funding from one lender, a floating charge across these also provides additional flexibility. Also, drawdown facilities are available for those who require funds periodically as a development progresses. Penalty free terms are available for those who are likely to develop then sell the property in question.

Whilst we have access to the whole market, Warr & Co has developed connections with local high street banks which have yielded excellent rates for clients, both on a status and self-certification basis.

Secured loans

Secured loans are in essence loans secured on property, much in the same way as a mortgage. Secured loans often require no up front survey, legal or other fees and are generally available for any purpose. The lender takes a second charge on a property, with the existing mortgage lender always taking the first legal charge on the security.

There are many occasions where a secured loan would be more appropriate than a mortgage.

For more information or assistance, please do not hesitate to contact us.


Think carefully before securing debts against your property. Your property may be repossessed if you do not keep up repayments on a mortgage or any other debt secured on it.

Date of Article: 15th October 2008

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This domain is owned by Warr & Co Charted Accountants which is a member of the Institute of Chartered Accountants in England & Wales (ICAEW). Whilst the information detailed here is updated regularly to ensure it remains factually correct, it does not in any way constitute specific advice and no responsibility shall be accepted for any actions taken directly as a consequence of reading it. If you would like to discuss any of the points raised and / or engage our services in providing advice specific to your personal circumstances, please feel free to contact Peter Edwards on 0161 477 6789 or email us at