Business Loan Interest Rate Question and Buying Property Personally From Own Company

[Raul]

My brother owns a small construction company and built some apartments in a section 23 area. The property is probably worth at least €1,000,000 (reduced dramatically from last year's valuation) and he has an interest only loan of €400,000 on it. The interest rate is nearly 11% which I think is quite high although I am not familiar with the going rate. Does this interest rate sound right for somebody in his position?

Secondly, he is trying to decide whether it would be worth him personally buying the apartments from his company. He would be able to avail of a lower mortgage interest rate and the section 23 tax breaks but there are other drawbacks.He is planning on seeking professional advice on this but I was hoping somebody here could give us an idea of some of the things that need to be considered here. Thanks!

 

[Kate10]

Re: Business Loan Interest Rate Question and Buying Property Personally From Own Comp

Hi Raul,
I can't advise you re buying the apartments from the company as that would depend entirely on your brother's tax and personal circumstances. However 11% seems extremely high. I would have though somewhere between 6 and 7% would be more realistic.

What is your brother's repayment capacity like? Are the properties rented or rentable? What is the rent roll?

If your brother has decent repayment capacity then he needs to refinance immediately. With that kind of loan to value and a decent rent roll he should be able to get a better rate.

Best of luck,

Kate.

 

[Raul]

Re: Business Loan Interest Rate Question and Buying Property Personally From Own Comp

Hi Raul,
I can't advise you re buying the apartments from the company as that would depend entirely on your brother's tax and personal circumstances. However 11% seems extremely high. I would have though somewhere between 6 and 7% would be more realistic.

What is your brother's repayment capacity like? Are the properties rented or rentable? What is the rent roll?

If your brother has decent repayment capacity then he needs to refinance immediately. With that kind of loan to value and a decent rent roll he should be able to get a better rate.

Best of luck,

Kate.

Hi Kate,
Yeah I thought 11% was really high too. The rent just about covers the interest repayments. However, like everybody else in construction, work is slowing up and he has only gauranteed work until the end of February so we just want to start planning in case he is out of work.

Thanks for the reply here. I appreciate it!