Accountant with missed mortgage payment buys second home

Accountant with missed mortgage payment buys second home

23.01.18 | Written by: Charlie London

The client: A chartered accountant who works full-time for a large company asked for our help to get a mortgage to buy a second home to use at weekends and for holidays.

The property: A 4-bed semi-detached Victorian villa requiring some TLC in a popular coastal town on the South Coast.

The finance
: Even though the client had a deposit of 25%, two issues ruled out quite a few lenders:

  • Interest only terms
    The client wanted interest only terms to keep the monthly mortgage payments to a minimum which would ensure that she had enough cash flow to make the necessary refurbishments to the house.

  • Recent missed mortgage payment
    Yes, it can even happen to accountants! The client had simply forgotten to move money from her main bank account to her mortgage bank account which resulted in a missed payment. Even though the client had rectified the situation immediately, the default was still recorded on her credit profile. Apart from that one blip, her credit profile was clean.

We identified a high street bank which we knew would take a pragmatic approach. Here’s what happened:

We spoke to the bank’s Business Development Manager and ran through the client’s circumstances and requirements. The BDM felt that our client would be given interest only terms because the property was a second not primary home purchase. He also thought that if the client could prove that the missed payment was a simple mistake then this would be overlooked.
So, on behalf of our client, we applied for a Decision In Principle (DIP) which was duly given. We then submitted the full mortgage application and the subsequent valuation confirmed the property would provide the bank with sufficient security.

In addition to the standard, supporting documents, the lender asked the client to provide copies of her bank statements for the period when she missed the mortgage payment to demonstrate that she had made a simple, clerical error. The client promptly sent these in and the bank agreed to lend.

We then worked with our client, the lender, the estate agent and the solicitors to keep the application on track and both the mortgage and the purchase completed just four weeks later. Here are the details:

Property price: £560,000

Loan amount: £420,000

LTV: 75%

Rate: 2.02% (3.5% APRC) 5 year fixed

Term: 25 years interest only

ERCs: 5% of outstanding loan in year 1, then 4% in year 2, 3% in year 3, 2% in year 5 and 1% year 5

Mortgage payment: £706 pcm

Lender arrangement fee: £999

Consultant: Charlie London 01732 471604

ANY PROPERTY USED AS SECURITY, WHICH MAY INCLUDE YOUR HOME, MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.