Refinancing a modest but thorny commercial mortgage?

Refinancing a modest but thorny commercial mortgage?

9:22 AM, 8th October 2021, About 2 years ago 3

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Hello fellow P118’s – I wonder, can anybody help with a thorny little problem that we have?

We need to refinance a modest (just over £500K) mortgage for a small office building that we own as a part of our pension. The current LTV is less than 60%.

Kicker #1 is that this loan is costing me LIBOR + 1.5% and I would be reluctant to increase this unless absolutely unavoidable. Are such terms even available these days for loans against commercial premises?

Kicker #2 is that the loan is to a BVI registered company and the usual response of banks so far is to (quite literally!) slam the phone down when advised of this. I never get to the point where I can explain that this company was setup as a part of a legitimate HMRC approved pension scheme and has always paid all of its UK taxes in accordance with the letter and the spirit of the law.

I need to raise a little more capital – maybe taking things up to around 70% LTV, but the main reason why I want to do this is to ditch the whole BVI thing which has become highly toxic in recent years and allow an orderly transfer of the asset to a fully onshore setting.

The BVI company itself became deliberately de facto UK domiciled a couple of years ago by dint of the appointment of a UK based director and it duly now operates as a UK company in the eyes of HMRC, but unfortunately, the banks seem unable to recognise any of this.

Why not approach the existing lender? Well, I have, several times, but they stopped doing commercial loans many years ago now and point-blank refuse to countenance anything that constitutes a change short of full redemption.

The current lender is a major UK building society that did full due diligence and clearly had no issues with a BVI company and the pension arrangements embodying it at the time, though this is really irrelevant information at this point. I have included it here simply to illustrate that this is not some kind of dodgy arrangement.

Is anybody able to help with this situation, please?


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Malcolm Jones

11:48 AM, 8th October 2021, About 2 years ago

Hi Tony. Unfortunately, given the BVI circumstances, the pension link and the fact that it is a commercial property, there are very fewer lenders that will consider this. If we were able to engage the interest of a lender, their terms would not be close to your existing 1.5% over LIBOR. Their interest rate would be in the region of 3 times as much.


12:22 PM, 8th October 2021, About 2 years ago

Hi Malcolm - yes, this is what I have been finding, unfortunately,

For interest, why is a pension link considered a negative factor please?

Also, you say 'very few' lenders, but are you aware of any at all...?

Malcolm Jones

13:44 PM, 8th October 2021, About 2 years ago

Hi Tony. The reason behind lenders not liking the pension link is because of the additional due diligence required.

The only lenders that might consider this would be specialists and hence the special interest rates

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