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Case Profile
The clients were looking to remortgage their main residence for £1.7 million. However, the clients’ age, preferred repayment strategy and the type of product wanted made securing the mortgage a challenge.
The term on the clients’ previous mortgage was coming to an end and they required an interest only mortgage on a 5-year term. The clients had other properties which they planned to sell when the top end of the housing market picks up again. The proceeds of these sales would be used to service the debt. These product requirements, along with a high loan amount, created a challenge as there was no guaranteed repayment vehicle. Lenders generally would not be happy to take a view on such circumstances.
The clients wanted to repay the interest on the mortgage from their business earnings. In the most recent year, their business profits were high enough to meet most lenders’ affordability criteria. However, the previous years were lower as some of the business’ revenue streams are linked to the strength of the pound. As the pound has been declining recently, it meant that profits had increased, thus increasing their income. Despite this, many lenders would not be happy to take on a view on this complex income structure and uncertainty of income.
The borrowers are in their late 60s. This was a further hurdle as the case became higher risk, which is again something that some lenders would prefer not to deal with.
Solution
The clients approached us to assist them in sourcing an appropriate lender for their interest-only mortgage. We took the time to fully understand their requirements and were able to find them a solution. Due to the clients’ age, a high street lender would not be appropriate, therefore we utilised our strong relationships with a number of private banks.
We sourced a private bank which accepted all criteria, and are flexible in their income assessment. This was important to the clients due their complex income structure. The bank took the view that the most recent higher income will be sustainable, especially in light of the recent Brexit vote. The pound is weakening and expected to remain so in the short to medium term, to the benefit of the clients’ business.
Furthermore, the bank was happy to lend on an interest-only basis for a 5 year term.
The clients were happy with the mortgage terms presented and secured funding for the million plus remortgage of their main residence.
You can read more about borrowing into retirement here.
Deal Highlights
| Loan amount: | £1,700,000 |
| Rate: | 4.25% (margin of 4.00% above Bank of England base rate, currently 0.25%) |
| LTV: | 42.5% |
| APR: | Overall cost for comparison 4.45% APR representative variable |
| Term: | 5 years |
| Type: | Interest only |
| Loan purpose: | Remortgage |
| Lender’s arrangement fee: | 1% of the loan amount |
| Early repayment charges: | None |
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 4.45%APR representative variable based on 5 years at 4.25%. Lender’s arrangement fees of 1% of the loan amount. 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 1.17% of the mortgage amount is payable, of this 25% is payable on application and the remainder on completion, e.g. on a mortgage of £1,000,000 the fee would be £11,700 of which £2,925 would be payable on application. The precise amount will depend on your circumstances.
Your home or property may be repossessed if you do not keep up the repayments on your mortgage. You may have to pay an early repayment charge to your existing lender if you re-mortgage.
