Remortgage to provide rent-free accommodation for family member

We were approached by a client who had recently remarried and was now looking to move in with his new partner. Rather than sell his home, the client wished to retain ownership and allow his daughter to continue living there after he had moved out.

The client had originally purchased the property in 2001 for £135k, since then the property had decreased to a value of £125,000, meaning the client had an outstanding mortgage of 100% LTV.

Able to pay off 10% off the loan amount without incurring any ERCs, the client now needed to find a lender who would offer a remortgage at 90% LTV.

There were two further challenges with this case:

1. The client’s income would no longer be sufficient for the requested loan amount, so his new partner would need to be added to the mortgage.
2. Many lenders are not comfortable lending on a property occupied solely by dependent relatives.

We approached a high-street bank which we knew would consider the case, whilst still being able to offer a competitive rate. The following terms were offered:

Property Details

Property value: £125,000

Loan amount: £112,500

LTV: 90%

Rate: 2.34% fixed for 2 years

Term: 22 years capital and interest

Mortgage payment: £595 pcm

Previous monthly payment: £930 pcm

Lender arrangement fee: £995

Consultant: Andy McOwat, 01625 416396

2nd May 2017