Our clients – two doctors – wished to let out their property and purchase a second, larger one, into which they planned to move once the necessary financial arrangements had been made. In order to do this, they hoped to take equity out of their first home and use these funds to put down a deposit for their second. They were particularly set on the idea of keeping their current home while purchasing their second, and this presented them with a number of difficulties, because the mainstream lenders with whom they had been dealing up to this point were unwilling to offer them a loan of the required size. There were a number of reasons for this: firstly, because both of our clients worked for the NHS while doing private practice work, and this left them each with two primary sources of income, one of which was classed as employed, one as self-employed. Mainstream lenders were unwilling to incorporate the entirety of our clients’ incomes when calculating affordability, which severely reduced the size of the loan for which they were deemed eligible. In addition to this, our clients were committed to paying £3k of school fees per month.
When they came to us, our clients had £328k equity in their first home, which had been valued at £550k. The second home they wished to purchase was worth £760k. We needed to find a lender who was willing to accept both of our clients’ incomes as primary, to take both incomes in full, to accept the £3k school fees per month, and who was amenable to top-slicing, so that we could take equity out of the first mortgage and put it towards the deposit for the second. We were able locate lenders who met all of these requirements, and our clients were able to achieve their desired outcome.
We advised our clients to take £114k out of their first home and put it down as a 15% deposit for their second. We then arranged two five-year fixed mortgages: the first was a let-to-buy interest-only mortgage on the first property, with a loan size of £336k, a rate of 2.44%, and mortgage payments of £685 per month. The second was a standard 85% LTV residential mortgage with a loan size of £646k, a rate of 2.14%, and mortgage payments of £2786 per month. The rent for first of these properties had been valued at £1400, which meant that it would cost them around £2k per month to run both properties.