Mortgage or “private finance” solution
Is it a mortgage you need or could it be a “private finance” solution you are after?
If you are a business owner, entrepreneur or professional or indeed anyone else in somewhat extraordinary circumstances navigating the mortgage market on your own can be a frustrating experience. Even though you may have great earnings and even greater earning potential it can be difficult to find a lender who will give you full credit for your financial position, prospects and steadily increasing income curve.
However, with the help of an expert broker; often described as providing a “private finance” service, a bespoke mortgage solution from either a high-street lender via their senior underwriters or from the boutique lending arms of a private bank might be achievable.
These solutions are not usually available to borrowers who approach the lenders directly as so many adopt a ‘computer says no’ approach. If you don’t meet their standard algorithms you may fall through the cracks, but a mortgage broker like Private Finance can draw upon a network of decision making contacts across the lending industry to find a solution to fit your needs.
Income is not the only issue. Features of the property you wish to finance can also present challenges: type of construction, the overall acreage, condition, length of lease etc are examples of reasons why a lender might reject an application.
Other reasons for failure might relate to the borrower such as his or her age, nationality and obviously, credit history.
Your mortgage should complement your financial planning strategies and a good broker will also make sure that your facilities are delivered on competitive terms. Guidance should be provided on how the mortgage is to be structured; such as a capital & interest “repayment” mortgage, interest-only or a “bullet” style.
Advice on interest rate choices will help you decide between the various periods of fixed rates, trackers, discounts and caps, or even a combination of these.
Simon Checkley, managing director at Private Finance, says: “When approaching a lender direct, you must meet their standard underwriting criteria or they may refer your application on for further consideration to their specialist; larger loan and high net worth teams if it is more complicated. However, a good broker is able to put emphasis on certain elements of your case.
“For example, you might know that a large expense item is going to be coming to an end soon, such as school fees, or that a new income source will be kicking in. Factors like this could have a big impact on your affordability and improve your risk profile in the eyes of the lender.
“A private finance broker will know which lenders offer the most flexibility in different areas of their criteria and therefore which is the best to approach given your individual circumstances. We work regularly with over 90 lenders to find the best deal for our clients.”
Some recent examples of borrowers we have helped at Private Finance, include:
A £1.7m property at 95% loan-to-value
Most high street lenders would not offer a mortgage with such a small deposit on a property worth this much, but we were able to find a private bank to help. On top of this, the borrowers were both company directors, which can make securing a mortgage more complicated. Furthermore, both borrowers had mortgages they were still repaying in the background. We were able to find a lender who would look at the whole picture and take account of the profitability of each of their businesses rather than looking only at the amount each applicant was drawing as a salary.
At just over £80k, their joint earnings were relatively low compared to the value of the property they were buying, but the lender was able to appreciate that there was more value in the businesses and therefore that they could draw a higher salary if they needed to. We were able to secure the couple a tracker mortgage at 1.95% (over base rate 1.7%) with no exit penalties.
Refinancing a buy-to-let portfolio to raise a deposit to buy a main residence
A couple who own five buy-to-let properties needed to raise a 30% deposit to buy a new home to live in themselves. We were able to do this by remortgaging three of the buy-to-lets, working with an accountant to work out which properties it would be most tax efficient to use. These were moved onto a competitive buy-to-let rate of 2.1% over base rate and they were able to buy their £1.1m new home with a 5-year fixed rate mortgage at 1.94%.