We were approached by a retired landlord who was looking to raise capital from her two-bed London flat for the purchase of a Cornish holiday park.
We faced a few challenges when it came to placing this case as the client is:
- 70 years old – limiting the choice of lenders willing to accept the deal as a lot of lenders will not lend when client is over 75 at the end of the mortgage term.
- Retired with a pension and rental income – many lenders won’t take a client’s rental income into account.
After looking into the available options, the client chose an equity release product with no monthly payments
The lender charges annual interest which is then rolled up into the loan and the client will settle this at the end of the term with either repayment or property sale.
The following deal was agreed:
Property value: £650,000
Loan amount: £325,000
Rate: 5% per annum linked to the National Price Rise Index
Term: 5 years
Mortgage payment: £0 pcm – repayment at end of 5 year term.
Lender arrangement fee: 2% (£6,500)
Rental income: £1,400 pcm
Gross yield: 2.6% pa
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