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Mortgage with an overage clause – A dream home purchase kept on track

At a glance:

The clients, aged 60 and 69, were purchasing their £910,000 dream home after years of renting. They required a £300,000 for the mortgage and to carry out minor renovations.
Challenges included their age, complex income sources (pensions and business dividends), and an overage clause on the property.
A tailored mortgage solution was arranged through a flexible building society willing to lend up to age 80 and accept varied income. The lender accepted the overage clause due to the low loan-to-value and detailed legal review.

Our client’s background

Our clients, a couple aged 60 and 69, were stepping into a significant phase of their lives. After years of renting, they aimed to settle down in their dream home, a property priced at £910,000. They were to invest significant personal savings as their deposit, and required a mortgage of £300,000 to facilitate minor renovations and complete the purchase.

Initial challenges with the overage clause and income

The primary challenges were:

The couple’s age
Their complex income streams (including pensions and dividends from a family business into retirement)
Legal constraints — an overage clause on the property

What is an overage clause?

An overage clause is a legal agreement in a property sale that allows the seller to receive additional payment after the sale, if certain future conditions are met — usually if the property increases in value due to development or a change in planning permission.
Overage clauses can be problematic for lenders as they can impact on the strength of their lending security and add legal hurdles that many mainstream lenders will want to avoid.

Initially, the clients were working with another mortgage broker, however, they found themselves abandoned mid-process, when the mortgage broker could not find a home for this unique combination of circumstances.

Enter Private Finance...

Solving the overage clause and mortgage need

After conducting a detailed mortgage fact find, we approached various lenders with a detailed mortgage proposal, eventually aligning with a reputable Building Society. Our decision was influenced by:

Age consideration and accommodating income criteria: The Building Society’s willingness to accommodate borrowers up to the age of 80 and consider diverse income streams (state pensions, dividends, and business profits) was pivotal.
Legal and property value assurance: The lender reviewed and accepted the overage clause details, reassured by the property’s valuation and low loan to value.
Affordability focused product: An interest-only mortgage was structured to ensure manageable repayments for our clients, complemented by a competitive fixed rate for 3 years, which was notably competitive among other building society offerings.

Outcome, benefits, and key takeaways

The outcomes of our tailored mortgage solution were fundamental to the client’s ability to proceed with the purchase. The solution provided:

Financial security and comfort: With a longer-than-expected mortgage term of 10 years and interest-only payments, the clients secured not just a property but also financial comfort and predictability well into their 80s.
Successful property acquisition: Against the odds, the couple were able to proceed with the property purchase, with no complications arising from the overage clause thanks to thorough research, providing the lender with prior warning and sufficient detail.

The key takeaways

Explore non-traditional lenders–Age and complex income structures may limit options with high street banks. Building societies and niche lenders often provide more flexible terms.
Understand legal implications–Especially with unique property clauses, ensuring lender and legal compliance is crucial to avoid future complications.
Plan for long-term affordability–For borrowers approaching or in retirement, ensuring that monthly payments remain manageable over time is as important as securing the mortgage.

Conclusion

For the couple, the journey to securing their forever home was fraught with potential setbacks. But through a tailored Private Finance mortgage strategy that considered all the potential pitfalls, they were not only able to purchase their desired home but also secure an attractive mortgage solution, proving that age and complex income are not barriers to raising a mortgage.

If this scenario resonates with you or you’re seeking personalised mortgage advice for another situation, please get in touch — we’d be happy to see how we can help. Call us on 0800 980 8777 or email info@privatefinance.co.uk.

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