Self-Employed Part Interest Only Mortgage

Proposition

Our self-employed clients, running their own marketing company, were looking to raise a mortgage of £600,000 on a property valued at £800,000 (75% Loan to Value) to replace their current mortgage and to fund a large subterranean extension. The clients wanted an interest-only mortgage with no repayment vehicle specified; the loan to be repaid partly by way of substantial profits being made within their business.

To prove income, they needed to use their previous year’s accounts as the current financial year was not yet complete and they did not wish to use projections and interim accounts.  The company had also changed from being a partnership to a limited company mid-way through the year and had substantial retained profits.

The clients were on the point of selling their property and moving on after some bad advice and several failed attempts to get necessary funding for the extension. The property had been their family home for several years, but, with three children, they had outgrown the space, and without the extension it was no longer suitable.

Solution

We presented the case to a bank who agreed to work purely off an accountant’s reference for income and were not concerned about the change in company structure or retained profits. The bank agreed to lend 60% of the value of the property on an interest-only basis with the eventual sale of the property to cover this portion of the loan and 15% on a capital repayment basis. They agreed to this after calculating that, after the extension works, the property would be worth in excess of £1m and the bank’s exposure would therefore be less than 60%.

The part interest-only, part repayment loan of £600,000 was for a term of 17 years, lent at an initial rate of 3.25% fixed until 1 May 2014, reverting to 4.54% for the remainder of the term. (APR 4.5%* - the overall cost for comparison) Early repayment charges of 2.5% of the loan balance outstanding apply until 1 May 2014.

Fees

The clients paid a lender’s application fee of £99 and a product fee of £995.

 

*APR (the overall cost for comparison) calculation based on a 17 year term, part interest only, part repayment mortgage with £99 application fee, £995 product fee, legal and valuation fees of £2,000. The actual rate available will depend on your circumstances. Ask for a personalised illustration.

YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.

© Private Finance Limited, 2019. Private Finance provides independent mortgage advice and arranges individual mortgage solutions for clients. Private Finance is a trading style of Private Finance Ltd, 29 Lincolns Inn Fields, London, WC2A 3EG, registered in England no. 3855776 and its Appointed Representatives. Private Finance Limited is authorised and regulated by the Financial Conduct Authority (FCA registration number 310566).

Private Finance Ltd is rated 4.94 stars by Reviews.co.uk based on 576 merchant reviews

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576 Reviews
Cold called Michael 17:23 on a Tuesday evening who within 20 minutes had gleaned sufficient information to email a solution on Friday afternoon. All correspondence and phone calls were answered quickly and accurately. Mortgages were raised in plenty of time for exchange. Michael, Maniksha and all others involved made an excellent responsive team making a difficult situation so much easier.
Just brilliant. Simon and Chloe have taken care of everything, twice now. The first time was really difficult, and Simon put in a huge amount of work to make it happen. Second time around, Chloe has taken the lead and it has been seamless. Thank you!
Jason Hall has always been outstanding and faultless to work with. He's also a top guy that really makes me feel like I'm his only client. Thank you!
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