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A growing number of investors are diversifying residential portfolios through expansion into semi-commercial property and the lender market is responding to this demand.

There are now two or three buy-to-let lenders that are able to lend on residential property with an element of commercial given certain parameters.

With these lenders at least 60% of the block value, either rental or capital, should be residential.

The arrival of these lenders is creating diversity, challenging existing players and presenting new opportunities for clients.

For example, they are able to lend to investors who want to rent part of the property to themselves and it’s even possible to secure finance on care homes using this approach.

For example, we recently completed a case for a client on a care home with accommodation for six vulnerable residents looked after by three carers each day.

Ordinarily, this may be considered to be a case for a specialist commercial lender, but we were able to place it with a buy-to-let lender on the basis of it being a house in multiple occupation (HMO).

Consequently, we were able to achieve a lower rate. This is beneficial, not just because it is a cheaper product, but the maximum loan available is obviously a calculation based on the achievable rental value and the rate, so a lower rate enables investors access to more gearing, and investors still want leverage.

As with any type of specialist mortgage, knowing the right lender with which to place a case based on the circumstances of the client and the security and the appetite of the lender is half of the battle – but only half.

A strong working relationship with a lender is also an important element of a successful application and can often make a vital difference in getting the case over the line, particularly when there are considerations that fall within the grey areas of a lender’s criteria.

Meaningful relationships like this can take years to develop. Alternatively, you could partner with a specialist, leverage their relationships and be confident that you are delivering the best possible outcomes for your clients.

Dak Lam is senior associate at Sirius Finance

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