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Case profile
The client wanted to purchase a new house for his family valued at £2.1 million. He owned a trading company which had £700,000 retained profit in cash which he wanted to use as a deposit, however to remove the cash from the company would have meant paying a significant amount of income tax on the dividends. To avoid this, our client considered purchasing the property in the business’ name but recent changes to legislation mean those who own a residential property in the name of a non-natural person face possible annual charges and potential capital gains tax liabilities in the future.
The solution
As a solution, were able to arrange a mortgage of £1.47 million with a private bank, the client depositing £700,000 in an interest-bearing account in the company name. He then pledged this cash by signing a personal guarantee for a £700,000 loan in his own name against the commercial cash deposit. This loan will form the £630,000 deposit for the house purchase and will help fund the stamp duty of £105,000.
This solution was able to save the client significant amounts in income tax and removed him from the uncertainties surrounding the government’s plans to change ownership of residential property in corporate structures.
Deal highlights
| Loan amount: | £1.47 million (70% LTV on property value of £2.1 million) |
| Rate: | Bank of England Base Rate + 3.25% (pay rate of 3.75%) |
| APR: | Overall cost for comparison 4.3% APR representative variable |
| Term: | 5 years |
| Type: | Interest Only |
| Loan Purpose: | Residential Purchase |
| Lender’s arrangement fee: | 1% of loan amount |
| Early repayment charges: | 1% of loan amount if repaid within the first 12 months |
Notes
This case study is for information and illustration purposes only. It is not an offer, or suggestion of an offer. Each mortgage case is assessed on an individual basis and there is no guarantee that the solution described here can be repeated in the future.
Please note that this specific deal may not be available to – or suitable for – all customers, dependent on their individual circumstances. The rate quoted may become out of date at short notice and may not be available at the point at which customers enquire about it. This document may not contain all the information needed for customers to make a decision and they should seek advice.
Overall cost for comparison 4.3% APR representative variable based on 5 years at 3.75%, lender’s arrangement fees of 1% x £1.47 million (£14,700) and legal and valuation fees of £5,000. The actual rate available will depend on your circumstances. Ask for a personalised illustration.
largemortgageloans.com is a trading name of largemortgageloans.com Ltd. A fee of up to 1% of the mortgage amount is payable, of this 25% is payable on application and the remainder on completion, e.g. on a mortgage of £100,000 the fee would be £1,000 of which £250 would be payable on application. The precise amount will depend on your circumstances.
