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Case profile
The clients wanted to purchase their first home in the UK for £3,250,000 and they needed to borrow £2,250,000. He is an investment banker and she is a solicitor working part time. He just started a new job on a £250,000 basic salary, with bonuses yet to be determined, but with a special agreement that he would be awarded £375,000 annually over the next four years as a special incentive for him to join the bank.
However without this special bonus, a normal lender would view the mortgage as a 7.2 x multiple of joint incomes.
The clients also want this loan with interest-only payments each month.
Solution
We approached a private bank and presented the deal in a way that meant the clients had enough cash to make the interest payments until February 2015, when the first special award of £375,000 would be guaranteed to be paid out. The clients agreed to commit to reducing the mortgage by £200,000 each year for the four years of the special award period, after which time they would be owing only £1,450,000.
The £1,450,000 is within what is considered affordable on their basic salaries, and would also be less than 50% of the value of the house today, so the bank felt this would be affordable.
The interest-only structure was secured because the client had previous investments from another job whose values were difficult to quantify, but we worked with the client to explain how the investments worked and the bank felt that this presented an acceptable repayment strategy for the residual £1,450,000 by the end of the mortgage term
Case highlights
| Loan amount: | £2.25 million (70% LTV on property value of £3.25 million) |
| Rate: | 2.75% (discounted variable rate) |
| APR: | Overall cost for comparison 3.3% APR representative variable |
| Term: | 10 years |
| Type: | Interest Only with Annual Bullet Repayments for the first four years |
| Loan purpose: | Residential Purchase |
| Lender’s arrangement fee: | 1% of loan amount |
| Early repayment charges: | 1% of loan amount in the first year |
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 these terms 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 3.3% APR representative variable based on 10 years at 2.75%, lender’s arrangement fees of 1% x £2.25 million (£22,500). The actual rate available will depend on your circumstances. Ask for a personalised illustration.
A typical fee of 1.17% of the mortgage amount is payable. Of this, 20% is payable on application and the balance of 80% on completion. For example on a mortgage application of £100,000 the fee would be £1,170 in total. Of this, £234 (20%) would be payable on application and the balance of £936 (80%) on completion. The total fee is non-refundable.
Your home may be repossessed if you do not keep up repayments on your mortgage.
