Our client – a self-employed director of multiple limited companies – came to us with a very specific request: he wished to purchase a property worth £2.75m; he required a mortgage of £1.925 million; but off the back of a consultation he had had with his tax adviser, he wished to structure this purchase in a unique way. Specifically, he wanted to purchase the property through one of his subsidiary companies – a UK registered property company– and then, once the purchase had been completed, to live as a tenant in this property and pay the market rate of rent to his property company.
This case presented a large range of difficulties. Firstly, the structure of the purchase was highly abnormal. Not only was this residential property to be purchased through a limited company structure, but the deposit for the purchase was to be provided by a parent company. We therefore needed to find a lender that understood our client’s circumstances and preferences, was able to account for complex incomes, and was willing to accept the proposed arrangement. Moreover, a minority of our client’s income was derived from companies that were based overseas and earning foreign income. It was therefore necessary to find a lender with an ability to lend where the loan may be deemed foreign currency.
The difficulties outlined above were the most significant in this case, but, in addition to these, our client made a number of other requests that made locating a lender that much more difficult. Firstly, as a high net-worth individual with a variable annual income, our client wanted the option to overpay on the mortgage. We therefore needed to find him a loan with no early repayment charges. Next, our client expressed a desire to make a number of significant renovations to the property in the future. We therefore required a lender that was comfortable with such changes being made to the property. And in addition to all of this, we needed to find a lender that was willing to offer our client an interest-only mortgage, because he wished to keep his monthly mortgage payments as small as possible.
Our client recognised that it would be exceptionally difficult to meet all of his requirements; he therefore presented one of the properties already owned by his limited property company as potential security on the loan.
As an independent mortgage broker with access to every lender in the UK market and strong working relationships with a large number of private banks, Private Finance’s consultants are uniquely positioned to broker deals on complex cases of the type just described. On this occasion, our broker instantly recognised this as a case best suited to a Private Bank, and so began making overtures to a number of Private Finance’s contacts in these institutions. Having run the specifics of our client’s case past a number of private banks, we were eventually able to locate a lender that was willing to lend to our client on the terms he desired.
Even at this point, though, there were a number of new difficulties that arose. The lender we eventually selected had a loan to value (LTV) cap of 60%. Since our client required a loan with an LTV of 70%, it was necessary that he put down one of his other properties as security in order to push the loan through. We used one of the properties in his limited company’s portfolio for this purpose. There was already a small mortgage left on this property, so we arranged a remortgage with this new lender in order to pay off the existing mortgage and remove equity with which to bolster our client’s deposit on the new property.
We were able to secure our client two interest only loans with a combined loan value of £2,130,000 on a combined property value of £3,550,000. The loans were both five-year LIBOR trackers, starting at a rate of 2.66%, each with no ERCs. In addition, the lender we eventually selected was willing to agree in principle to let our client make significant alterations to the property.