The clients: A married couple, both of whom are pharmacists who run their own business. They asked for our help to find a mortgage to purchase their dream family home in an affluent area of Liverpool with good schools and, importantly, closer to family.
The purchase would mean a big step up in monthly mortgage payments, but the couple felt they could afford it because they had recently refinanced two business loans onto one more competitive rate and this had considerably reduced their outgoings.
The property: A large detached house with seven bedrooms and four reception rooms in need of some work to create a second kitchen and downstairs bathroom so that for his/her elderly parents could live with them. The couple believed that the work would significantly increase the value of the property and be a good investment and future inheritance for their children.
The finance: The couple had been advised by their accountant that they could take out a director’s loan of £480,000 from their business to use as a part of the deposit. The remainder would come from the equity in their current home.
Whilst this all sounds very straightforward, there was a spanner in the works which meant that they would not be able to get a mortgage with one of the high street banks. The new business loan has a goodwill element which makes the company profits appear much lower than they really are.
The application process: We approached an intermediary only lender which caters to business operators and the self-employed. Not only does this lender have a good understanding of business accounts, it is familiar with the concept of business goodwill and did not see this as a barrier to borrowing.
Keen to understand why the couple wanted a mortgage so much larger than before, we explained to the lender the couple’s plans and their change in financial circumstances.
The lender was happy with the explanation and the underwriting confirmed that the couple would be able to service the mortgage. To our clients’ delight, a formal mortgage offer was subsequently issued. Here are the details:
Property value: £1,053,000
Loan amount: £789,750
Rate: 2.89% 2 year fixed
Term: 23 years capital and repayment
Lender arrangement fee: £999 added to loan amount
Mortgage payment: £3,951 pcm
Consultant: Erin Gallacher, 01625 416392
12th February 2019