When they came to us, our clients lived in a three-bedroom house in Greater Manchester with their four young children. They owned a small property portfolio and had been running an online bookshop for a number of years. At this time, both of these income sources were delivering a healthy and consistent profit, and our clients felt that they were in a financial position to upsize to a property that could better accommodate the needs of their growing family. Having surveyed the market, they found a property that they felt to be perfectly suited to their requirements, but when they approached their bank in the hopes of securing finance, they discovered that they were unable to obtain a loan for the amount they required. To be specific, the property they had set their sights on was worth £760,000 and they had a deposit of £180,000, meaning they needed a loan of £580,000 in order to purchase the property.
The issue our clients faced was that despite having enjoyed a particularly prosperous year the year prior to their mortgage application, their bank was only willing to grant them a loan of £480,000, because the lender’s affordability calculations did not incorporate the entirety of our clients’ company’s net profits. Additionally, our clients expressed a desire to have as much of their mortgage put on interest-only as possible, so as to minimise their monthly mortgage payments. The issue they faced on this front was that in order to qualify for an interest-only loan, lenders often either require that borrowers have a minimum deposit of £250,000, or else that the mortgage is 60% LTV or less. Since our clients failed to meet either of these requirements, with a deposit of £180,000 and a loan to value of 76%, it seemed unlikely that they would be able to find a lender that would be willing to offer them a loan of the specifications they desired.
Our clients came to us with few expectations, having been told by their bank that they would be unlikely to find any lender that was willing to offer them a loan of the amount and type that they desired. However, with access to every lender on the market and close working relationships with a large number of building societies and banks, Private Finance’s brokers are uniquely positioned to find solutions to mortgage problems that may seem superficially unsolvable.
The first step was to locate those lenders that would be willing to offer our clients a mortgage for the full amount of £580,000. The lender we eventually went with was not only willing to include the entirety of our clients’ company’s net profits but was also willing to incorporate their surplus rental income when calculating the amount that they were willing to lend. Once we’d thinned the field of possible lenders down to those that were willing to offer our client a loan of the size they required, we then sought out those lenders that were willing to offer our clients an interest only mortgage. This proved to be a more difficult task, but in the end, after running the specifics of our clients’ case past a number of lenders, we were able to identify a small group of lenders that were willing to offer our client the exact mortgage they desired. Having done this, all that was left to do was select the lender that was willing to let our clients put as much of their mortgage on interest-only as possible – and at the most competitive rates.
We were able to secure our clients a five-year fixed mortgage of £581,000 on a rate of 2.39%. Furthermore, £450,000 of this loan was to be paid back on an interest-only basis, and the remaining £131,000 was to be paid back on a capital repayment basis.