At largemortgageloans.com we love a challenge, and our most challenging cases are often when a number of factors come together. Recently, our Associate Director Nigel Bedford reported a fantastic success with a case which brought together factors we often see, but not usually all together!
Case profile
Firstly, our clients were retired and in their 70s, classing them as later life borrowers. They split their time between London and a holiday home in Cornwall, but were looking to buy a larger, dream property in Cornwall for £3million. They wanted to complete this sale before selling their existing holiday home and raise additional finance of £2million to repay other loans.
Their only regular source of income was £70,000 per year from a private pension, plus they took irregular, non-taxable income from buy to let investments through their own Limited Companies. Therefore, the size of the £5million loan they were looking to secure on the main residence would be 61 times more than their stated income, which, needless to say, would never have passed an affordability test.
The couple owned a £7million new build house in London which has recently been completed. Contrary to what might be assumed, a single asset of this size is often difficult to borrow against, as lenders can be concerned that a single entity can mean exposure to too much risk.
Solution
Nigel’s solution bought together his network of lenders and knowledge. He presented a compelling credit proposal to the small number of private banks who would be able to consider such a complex case. It was identified that the most cost effective way for the clients to achieve their aim was to remortgage their existing main residence and raise sufficient capital to purchase their new holiday home with cash outright.
Nigel secured the £5million mortgage by offering further comfort to the lender by presenting a ‘top slicing’ option. Top slicing is a term used to describe topping up mortgage repayments with alternative sources, outside of your personal income. Although it would be unlikely our clients would use their managed investment portfolio to do so, it gave further reassurance to the bank, because it was feasible alternative servicing and repayment strategy.
Once this hurdle had been tackled, there was a further challenge as the client had a target interest rate that was 0.29% lower than the best rate usually offered by the bank. Nigel negotiated wiht the lender, stressing the overall strength and attractiveness of the client, and was successful in negotiating this discounted rate.
| Loan amount: | £5,000,000 |
| Rate: | 2 Year fixed rate 1.95% |
| Loan To Value: | 60% |
| APRC: | Overall cost for comparison 3.30% APRC representative variable |
| Term: | 5 Years |
| Type: | Interest only |
| Loan purpose: | Remortgage |
| Lenders arrangement fee: | 0.4% of loan amount |
| Early repayment charges: | 2% in Year 1, 1% in Year 2 |
This case is a classic example of the hard work, expertise and determination that our team employs every day to realise our client’s ambitions. If you have a complex case – or even an ambition you would like to realise – it could be more achievable than you think. Talk to the experts to find out how we might be able to help.
Overall cost for comparison 3.30% APRC representative variable based on 24 monthly payments at a fixed rate of 1.95% followed by 35 monthly payments at the lenders standard variable rate, currently 3.75%. Because all, or part of, the mortgage is currently, or will revert to, a variable interest rate mortgage, the actual APRC could be different from this APRC and the payments could increase, if the interest rate of the loan changes. For example, if the interest rate rose to 9.00% the APRC could increase to 6.30%. The actual rate available will depend upon individual circumstances and may not be available to everyone. Ask for a personalised illustration.
Your home or property may be repossessed if you do not keep up repayments on your mortgage.
You may have to pay an early repayment charge to your existing lender if you remortgage. Think carefully before securing other debts against your home.
