The Clients: A married couple looking to purchase their dream family home together after renting for several years. The husband owned and ran a successful business, taking a small salary and dividends, while the wife’s only income came from the rent of their two jointly-owned buy to let properties.
The Property: A four-bedroom terraced family home located in a highly desirable area of Berkshire. With excellent transport links to London and other surrounding towns, the property also benefited from lots of local green space and countryside.
The Finance: To purchase the family home, our clients needed an 85% LTV residential mortgage. The deposit was sourced from personal savings and retained profits from their limited company.
The Challenge: The biggest challenge our clients faced was making the affordability calculations work. Due to the husband’s tax-efficient income structure (small salary, topped up by company dividends), it wouldn’t meet lender requirements for the loan they needed, even with the additional rental income. Therefore, we needed to find a way to prove to the lender that they could sensibly afford the mortgage they required to secure their dream family home.
Our second challenge was sourcing a competitive rate. Typically, cases with complex income streams attract higher interest rates, so we’d need to shop around to find something below 3%.
The Solution: Drawing on our extensive experience of sourcing mortgage finance for complex income streams, we were able to develop a solution that, although not accepted by many lenders, could help our clients.
To solve the first challenge, we requested to see our clients’ business accounts to ascertain whether they could help with the calculations. We worked out that by using 50% of our clients’ company net profits from the last two years, plus the rental income from their buy to let properties, we could increase the couples’ borrowing potential by 382%.
Having found a potential lender with a good rate offering, we packaged all the relevant financial documentation to support the application. Working with the lender, we demonstrated that our clients could afford the £586,500 they needed to secure their new home. Once submitted, the case moved on quickly, much to the delight of our clients. Here are the details:
Property value: £690,000
Loan amount: £586,500
Rate: 2.85%, two-year fixed
Term: 25 Years, capital and interest
Mortgage payment: £2,740 per calendar month
Lender arrangement fee: £999 added to the loan
Consultant: Ross MacTaggart, 01732 471630
30th June 2021