High Affordability Calculation for Residential Remortgage

The Client: an employed accountant, who received additional income through renting out a room in his flat and bonuses.

The Property: a two-bedroomed leasehold flat in the centre of a Midlands city.

The Finance: the client was looking to remortgage the property so that he could remove his sister from the deeds. She had initially been on the property’s deed to help with affordability but did not live there. The sister now wished to purchase her own home, and she needed to remove her name to avoid the second home stamp duty surcharge.

The Challenge: while the client had enough equity in the property for an 83% LTV, most lenders also calculate residential loan affordability based on 4.5x the applicant’s income. Unfortunately, without his sister on the remortgage application, the client’s income did not quite reach this threshold which was going to limit the number of lenders and products available significantly.

The Solution: as this was a ‘like for like’ remortgage, we were able to approach a lender who can offer 5.5x income in their affordability calculations. Due to the client’s proven track record of keeping up with his existing mortgage repayments, the lender was happy to take into account his additional rental income and bonus scheme into their affordability calculations. As well as keeping the client’s monthly mortgage payments the same and making him the sole name on the flat’s deed, the product we were able to secure had no arrangement or conveyancing fees and a free valuation! Here are the details:

Property Details

Property value: £200,000

Loan amount: £165,000

LTV: 83% LTV

Rate: 1.95% 5-year fixed

Term: 31 years, capital & interest 

Mortgage payment:  £592 per calendar month

Lender arrangement fee: Free

Consultant: Erin Gallacher, 01625 416392

25th February 2020