Mortgage of nearly 6X income on interest-only terms for borrower with multiple income streams

The client: An accountant and part-time landlord who owns seven rental properties. He is 55 years of old looking to move home.

The property: A 3-bed Sussex farmhouse set in three acres.

The finance: Having tried to find a mortgage himself, the client approached us for help as he was unable to find a bank that would lend to him because of the following issues:

1. The client needed a lender which would take his rental income, salary and bonus into consideration when calculating affordability
2. To achieve the required loan amount, the client needed to borrow just under six times his income over 15 years (taking him up to his 70th birthday) – most lenders will only offer five times income
3. The client wanted interest only terms with the option to make over payments without penalty

The application process: We knew from experience that these issues meant that, realistically, there was only one lender that would be prepared to even consider giving our client a mortgage. So, we got in touch with the lender’s business development manager (BDM) to talk through the challenges before submitting an application.

To get the mortgage on interest only terms the manager suggested that the client would need to hold £300,000 of equity within the property. As this was not possible, we suggested that the client could top up the shortfall with the cash element of his private pension – the lender agreed that this would be acceptable.

The client took this on board and we submitted the application for a five year fixed rate which would also allow our client to pay off up to 10% of the capital each year without charge. We then kept in touch with the BDM to ensure we could provide additional information should it be requested by the underwriters. Much to our client’s delight a formal mortgage offer was issued four weeks later and from there the mortgage completed without hitch. Here are the details:

Property Details

Property value: £915,000

Loan amount: £686,000

LTV: 75%

Rate: 3.15% 5 year fixed (which also allows the client to pay off up to 10% of the outstanding capital each year without penalty)

APRC: 4.2%

Term: 15 years interest only

Lender arrangement fee: £999 added to loan amount

Mortgage payment: £1,803pcm

Consultant Mortgage Adviser: Gavin Richardson, 01732 471613

13th March 2018