Our clients – an IT director and his wife – were looking to purchase a property in the South of England for £1.15 million. They required a mortgage of £500,000, against which they intended to offset £200,000 in savings. This was because they wanted guaranteed instant access to the money – which would not have been possible if they had used it to reduce the mortgage to £300,000 – and wanted a better return on it than if it had simply sat in an instant access account earning no more than 2% gross per annum (1.2% net after higher rate tax).
They did try their own high street bank and initially received an agreement in principle for a fixed rate offset interest only mortgage. However, it then took 2 months before they were able to get an appointment with the bank’s mortgage adviser for a full mortgage interview, at which point they were turned down on the grounds that they wanted a term that would take them past 65 and, as far as the bank was concerned, ‘into retirement’.
Fortunately for our clients, at the same time as they were trying to get a mortgage from their own bank, they consulted Private Finance for a second opinion and we suggested submitting a second application as a back-up plan, on the proviso that, if they did receive a full mortgage offer from their bank, Private Finance would only charge them a £250 application fee to cover administrative costs.
When their own bank deal fell through, our clients switched to the offset deal that we had negotiated for them from an alternative lender, who was prepared to lend to age 70.
This meant that they did not have to drop out of the purchase transaction and lose their desired property. Lending Facility
A £500,000 offset interest-only mortgage, based on a £1.15 million valuation, was negotiated at Bank of England Bank Rate plus 2.59% lifetime tracker variable rate, giving a payment rate of 3.09% (APR 3.2 % - the overall cost for comparison). There were no early repayment charges. The client paid a £495 arrangement fee for this loan.
The clients were extremely happy with this outcome and relieved that they had consulted Private Finance in case their own bank failed to deliver the finance initially agreed, a scenario that has become more common since the tightening of lending criteria in April 2014.