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largemortgageloans.com were recently asked to assist a client who wanted to refinance his existing residential mortgage of £1.05m, which was approaching the end of its fixed-rate period. Having been refused a term extension from his existing lender due to the client already being 65 years old, largemortgageloans.com were asked to step in and help find a solution.
The client wanted a mortgage term of at least 14 years; taking him well beyond state retirement age. This immediately limited the number of lenders we could approach, as many do not provide large loans of this nature so far into retirement age, while many who do lend into retirement will assess affordability based solely on the available pension income. This added another layer of complexity as the client had no private pension in place. The reason for this was that as 50% shareholder in his company, he would continue to earn consistent levels of dividend income for the remainder of his lifetime.
The existing mortgage had been arranged on a part-and-part repayment basis, meaning 50% of the loan-to-value was arranged on an interest-only basis, with the remaining element on a capital repayment basis. Ideally, the client wished to remain on this structure of repayments.
By approaching the right lenders, a broker can really make the difference between a good and bad outcome for any client. Our client had no luck approaching his own high street bank and when looking at the case, we knew we could proposition this deal to regional lenders on our panel who use manual mortgage underwriting processes – which would be better suited to this client.
In our view, the case carried two very strong merits – consistent dividend income for the client over the last 3 years and a low loan-to-value of 60% against a property located in the much sought-after London location. On this basis, we were able to get a particular building society to assess the case. However, the underwriting team were concerned that the income was technically “property-related” which was not exactly in line with their lending policy, and they too were slightly concerned by the lack of a private pension provision.
The benefit of a manual underwriting process is that our broker was able to walk through the details with the lending staff and highlighted that the income being received was technically a limited company dividend and this would continue to be paid to the client in perpetuity. In the end, we secured the full £1.05m over a 14-year term as desired, on an incredible rate that would be competitive even on the high street. The rate was so good, in fact, that the client opted to switch from a part-and-part repayment basis to full capital repayment.
|Rate:||1.89% Fixed rate for 2 years|
|APR:||4.09% APRC representative variable|
|Loan purpose:||Residential Remortgage|
|Lender’s arrangement fee:||£1,999|
|Early repayment charges:||2% of loan amount in year 1 & 1% in year 2|
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 4.09% APR representative variable based on 25 payments at a fixed rate of 1.89% followed by 143 payments at a variable rate, currently 5.99% and lender’s arrangement fees of £1,999. Because all, or part of, the mortgage is currently, or will revert to, a variable interest rate mortgage, the actual APR could be different from this APR and the payments could increase, if the interest rate of the loan changes. The actual rate available will depend on your circumstances. Ask for a personalised illustration.
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.