Older couple remortgage self-built home to repay development costs

We were approached by a married couple, both full-time landlords in their early 70s, who were looking to remortgage a three-bed bungalow they had recently built in Kent.

They wanted to raise capital on the property to repay a bridging loan they had taken out to fund the build.

They do not yet live in the bungalow; they live in another house which they also own and hope to remortgage using a let to buy facility once their newly built home is refinanced.

The number of lenders willing to look at this case was restricted because:

  • The clients’ joint income is made up entirely from rent and pensions. Most residential mortgage lenders will not include rental income in the affordability calculation for borrowers above the age of 70

  • The couple were hoping to get a mortgage term of more than 10 years, taking both of the clients into their 80s – many lenders will not lend to borrowers older than 70

  • Some lenders would be worried that the couple’s existing home would become a rental property by stealth with a home-owner mortgage on it because the remortgage of the newly built bungalow is taking place before the refinance of their existing home. (Yes, that is difficult to understand… !)

Fortunately we have direct access to a specialist lender that uses a common sense approach to underwriting, accepts rent as income and lends to homeowners up to the age of 85 at cessation of the mortgage.

Also, happy with the clients’ previous experience of gaining buy to let mortgage finance, the following homeowner mortgage terms were offered.

Their existing home will be refinanced using a let to buy facility once the mortgage is completed.

Property value: £350,000

Loan amount: £180,000

LTV: 51%

Rate: 3.89% discounted tracker (lender’s SVR, currently 6.08% variable, discounted by 2.19%)

Term: 13 years capital & interest

Mortgage payment: £1,479 pcm

Lender arrangement fee: 0.5% (£900)

Consultant: Beckie Pepperrell, 01732 471602