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The client was looking to raise over £2.5 million to repay their existing mortgage and to fund the building works for a new home, where the mortgaged property stood. The case created a challenge, as the client earned their income in both Pound Sterling and US Dollar and they required a two million pound plus mortgage and two separate mortgage loans.
The client owns a mortgaged property and wished to knock it down completely to build a new house on the plot. Planning permission had already been obtained and, therefore, the funding to repay the existing home loan and for the construction was required. This created a challenge, as the number of lenders willing to offer such a large mortgage for both a remortgage and capital raising to fund construction works was limited.
The client’s income presented an additional challenge. They received income in both Pound Sterling and US Dollar, meaning that a foreign currency mortgage was required.
In March 2016, the EU Mortgage Credit Directive (MCD) put in place new regulations for lenders dealing with foreign currency mortgages, which effectively moves the risk of currency fluctuations from the borrower to the lender. This further limited the client’s pool of lenders, as some now perceive foreign currency lending as high risk. You can read more about foreign currency mortgages and the EU MCD in our blog here.
The client owned another property which he planned to live in until the new house was built. Therefore, there would be no problem if the construction works were delayed.
Our Mortgage Managers have extensive experience in dealing with large and complex mortgages. We have strong relationships with a range of niche lenders and Private Banks, who have flexible lending terms and are willing to consider complex cases on an individual basis. This enabled us to source a Private Bank, with an appetite to accept the client’s foreign currency mortgage application.
When presenting the case to the lender, we highlighted the fact that the client was able to use some of their own funds to repay their previous mortgage, therefore, decreasing the remortgage amount required. We also clearly laid out the repayment strategy to the lender; partly made up of the proceeds from the sale of the second property, that the client would be living in during construction.
On assessing the information we presented, the lender agreed to fund both the remortgage and construction works on an interest-only basis. The client was happy with the mortgage terms and rates offered, and successfully secured the funding for a remortgage and construction of a new home from just a single lender.
|Loan amount:||£1,000,000 (repaying the existing mortgage) |
£1,650,000 (capital raising for constructions work)
£2,650,000 in total
|Rate:||2.15% (repaying the existing mortgage) |
3.55% (capital raising for constructions work
– this rate switched back to the 2.15% residential interest rate upon completion of the build)
|Loan purpose:||Remortgage and Capital raising for construction|
|Lender’s arrangement fee:||1.00% of the loan amount for remortgage |
1.50% of the loan amount for construction
|Early repayment charges:||No Early Repayment Charges at any point|
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.
Your home or property may be repossessed if you do not keep up the repayments on your mortgage. Changes in the exchange rate may increase the sterling equivalent of your debt.
You may have to pay an early repayment charge to your existing lender if you re-mortgage.