Large Deposit and Low LTV Provides Access to Cheaper Rates

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During the last six months, 5-10 per cent deposits have become more widely available again. Last year, however, 20-25 per cent deposits became the norm due to lenders’ conservative risk appetites during the height of the pandemic. Homeowners who have significantly high deposits of 40-50 per cent can still potentially access mortgage deals with the very lowest interest rates.

Interest-only mortgages enable buyers to reduce their outgoings in the short term, improving their cash flow. The flexibility that interest-only mortgages provide means that they are in high demand, particularly for clients with irregular income streams (for example, significant annual variable bonuses). However, suppose a buyer has a substantial deposit and a low loan to value, coupled with strong affordability and a suitable repayment strategy. In that case, a bank is likely to deem their financial profile as lower risk and can offer terms on an interest-only basis.

Case profile

Our introducers, an Independent Financial Adviser (IFA), referred their clients as they do not offer mortgage advise. The clients were a couple looking for an interest only, low loan to value mortgage for a £1.5 million property purchase in Kent. In this instance, our goal was clear – to secure a mortgage with the lowest fixed interest rate for the longest product term as quickly as possible. The client’s high business profile kept them very busy, so we handled the transaction from start to finish.

Solution

Associate Director Nigel Bedford secured the clients a 50% loan to value (LTV) mortgage of £775,000 on an extraordinarily low ten-year fixed rate of 2.07%. One applicant was the CEO of a Publicly Listed Company and was able to demonstrate very strong PAYE income (albeit part of which was significant annual performance related bonuses) to support their mortgage application. The transaction was dealt with swiftly, and the lender issued the mortgage offer within 7 days. The couple were delighted with their mortgage deal and happily live in their new home in Kent.

Suppose you have a substantial deposit towards a house purchase. In that case, you may be able to access lower interest rates and preferential loan terms, which are not available on the mainstream market. Talk to our experts in large and specialist finance. We have access to solutions you can’t find on the High Street, and we take a bespoke and tailored approach to every client case.

If you are looking to take out an Interest only-mortgage, its important you seek expert professional advice. At the end of an interest-only mortgage, the full capital of the loan will need to be repaid to the lender. You must ensure you have a suitable repayment strategy in place and monitor its performance regularly to ensure it will cover the full loan at the end of the term.

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Your home or property may be repossessed if you do not keep up repayments on a mortgage or any other debt secured on it. 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 remortgage. Think carefully before securing any other debts against your home.  

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