£2.8 million interest only remortgage for clients with no regular income
The situation?
After having already spoken to two well-known London mortgage brokers who had been unable to find a suitable solution, our client was introduced to us through a mutual private banking contact. They were looking to secure an interest-only remortgage on their £3.5 million home in South East London. This was in order to release £2.8 million in equity to fund some home improvements including an extension to the rear of the property and a loft conversion.
A consultant by trade, the client has been winding down their contracting business to make way for their passion, property development. Although they had an impressive property portfolio in the background, from a standard income perspective there was no feasible way they would be able to secure the amount of borrowing they were looking for.
It quickly became apparent that a mainstream lender was off the table as my client’s affordability and lack of traditional income were not suitable for them. We needed to find a lender that could think creatively about our client’s application and non-standard income, and present a bespoke offering to suit their requirements.
The solution?
After reaching out to a trusted specialist private lender with an appetite for complex income structures such as this, it quickly became apparent that the solution to my client’s circumstances lay in the sizeable assets within their large property portfolio. It was also agreed that the loan would be on an interest-only basis in order to bring down monthly costs. After laying out the client’s full financial and asset profile, the lender was able to monetise the client’s background property portfolio. To make this work, the bank had to first value the contained assets before assessing the rental income value versus the mortgage debt in order to effectively create a ‘quasi-income’. This allowed the lender to look aside from the client’s traditional PAYE and company accounts as these alone would not have satisfied stringent affordability checks. Instead, the lender was prepared t work off the quasi-income based on the equity sitting in the client’s portfolio.
We were able to make this application work because the lender was only taking a charge against the main property itself, with no charge held over the background assets. In essence, this meant that if push came to shove and the client couldn’t repay the interest-only debt on the loan, they could then lean upon the background assets to service the debt. In order to satisfy any associated risk, we needed to attain a written letter from my client to confirm there were no restrictions on the portfolio properties to be sold if required.
To the delight of my client and thanks to our close relationship with the lender, we were able to secure the £2.8 million borrowing on an interest-only basis over a five-year term.