Pepper interest only BTL loans with cross charging


Registered User
Let’s say a person has property A on an interest only tracker that is due to finish in 18 months time. They also have another rental property B cross charged which is not due to end term until 4 years time. Can they sell the first property without issue ? (Assuming the sales price will cover the mortgage). What happens if the sales price on property A will not cover the mortgage and there is a shortfall ? How do Pepper approach interest only loans nearing completion on cross charged properties ? Do they look for valuations on them all prior to agreeing to sell one ? Any experience ?

It would be better to give the actual figures.

This is my understanding

Scenario 1 - sell property A for more than the mortgage balance

Pepper would require you to apply the excess against Property B.

Otherwise, you are effectively reducing their security.

Scenario 2 - sell property A for less than the mortgage balance

You would need Pepper's permission to do this. Any shortfall would be secured on Property B and would be cleared when Property B is sold.

If they think that you are selling it to someone for less than the market value, they would prohibit it.

But if there is plenty of equity in Property B, they might allow it.
Not sure of exact figures Brendan but there are interest only BTLs with differing finish dates. Are you sure about giving Pepper the excess against the outstanding balance on B. If you had a CGT bill then would Pepper not be aware that you have to retain the surplus cash money for CGT that would have to be paid?
Say property A bought for 120k sold for 375k, therefore gain = 255k so 80k would need to be retained after deduction of fees for auctioneers and solicitors (allowing 10k for same). Would Pepper expect you to give them the remaining surplus against B ? Do they value the whole portfolio before allowing one sale ?
I recently went through this process with Pepper, I had 2 BTL's on interest only which were cross charged. For both properties, the amount outstanding on the loan was less than the market value. You need to go through a 'consent for sale' process with Pepper, basically you submit an email with your proposal e.g. I wish to sell Property A for 150k, amount outstanding on loan is 100k, after I take out costs (auctioneer, legal etc..), the amount remaining is 45k. I will reduce the loan on Property B with the surplus 45k.
Even though my case was straight forward, no negative equity, I was moving the full surplus onto the loan on property B - it still took 8 weeks for Pepper to make a decision. Their credit committee meets once a week on a Thursday and they may not get to your request.
If you have CGT due, then you need to build that into your case.