When a property is still in development stages, it’s often more complex to secure a mortgage. Lenders can only value the property as it is presented; therefore if a home is still under construction it’s highly likely the valuation they will offer will be significantly lower than the value of the finished property.
Case profile
Our recent client was faced with this issue. They were looking to borrow £700,000 to buy a property which was still at ‘second fix’ stage. Its value once finished was £1.875m but it wouldn’t achieve that valuation in its current state. Therefore, our adviser Paul Fredericks worked with the lender to agree two valuations; one at the time of the mortgage agreement and a further valuation when the property was completed to provide the lender with the necessary assurances.
Added to this challenge was the income multiple; our client had recently moved roles and, as a result, had moved onto a pay structure which included an annual bonus as a significant portion of their income. As there was no way to guarantee this bonus, the amount our client was looking to borrow would prove a stretch based on regular affordability tests.
Solution
Our team worked with the mortgage provider to explain the client’s background and track record of income. They also worked with the lender on a manual affordability test looking deeper than just income multiples, which found that our client was able to afford the loan required.
Deal Highlights
| Loan amount: | £700,000 |
| Rate: | 1.90% fixed for 2 years |
| Loan To Value: | 60% |
| APRC: | Overall cost for comparison 3.40% APRC representative variable |
| Term: | 22 Years |
| Type: | Interest only |
| Loan purpose: | Purchase |
| Lenders arrangement fee: | £499 paid on completion |
| Early repayment charge: | 3% of the capital balance less 10% of the capital balance |
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 The rate quoted may become out of date at short notice and may not be available at the point at which customers enquire about it.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 3.40% APRC representative variable based on 24 monthly payments at a fixed rate of 1.90% followed by 241 monthly payments at the lenders variable rate, currently 3.45%. Total amount to be repaid £1,219,367.68. As the mortgage rate is not fixed for the duration of the loan this amount is illustrative and may be vary in particular as a result of variations in interest rate.
Because part of the loan is a variable interest rate loan, the actual APRC could be different from this APRC if the interest rate for your loan changes. For example, if the interest rate rose to 10.20%, the APRC could increase to 10.90%. The actual rate and product 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.
