Key facts:
- Client lived in a house and rented it from the local council
- As part of the right to buy scheme, he wanted to purchase the property from the council at a discounted price.
- He approached his bank because he thought this would be the easiest option for him.
- Due to the way that he was employed in conjunction and not being knowledgeable enough about the mortgage process, his bank was unable to lend him a right to buy mortgage.
Our client:
Our client found us by searching for a mortgage advisor in the local area. He approached us because he did not know what to do next and wanted to speak to a specialist mortgage broker. He had lived in property that he rented from the council for 6 years and had become attached to it. When he found out that he would be potentially able to purchase the property from the council at a discounted price under the right to buy scheme, our client was over the moon.
He and his partner who were both working and had a good amount of deposit saved up jumped at the opportunity and at the first convenient moment, they headed down to their local bank and enquired about getting a mortgage. However, after the in-branch mortgage desk began to collect and checked through their documents and compared them to the bank’s lending criteria, some issues arose. Their application became unnecessarily complicated because the client did not know how to position their application properly and the bank declined to offer them a mortgage.
The main issue that the bank had was to do with the client’s income. Our client worked through an umbrella company which in turn paid him through another company. Although he worked under the umbrella company and received pay slips, he was technically a self employed professional on a contract. Because of how his pay slips looked and with the added complication of an umbrella company, his application could not proceed with his bank.
How did we help?
The clients approached us, desperate for some and completely clueless about how they were going to be able to get a mortgage. Our advisor Jade spoke to the clients initially to get a better idea of what they had done so far, what the lenders issue was and, what we could do to help.
As a senior mortgage advisor with years of experience, Jade has helped a lot of clients in a similar position in the past, so she had a good idea of where the confusion came about with the bank. It turns out that because the pay slips had the name of the umbrella company on and not the smaller company on them, the client’s contract did not match up with these. To the lender it looked like the employer could not be determined and the client was not receiving pay from a legitimate source.
Because things had gotten so confusing with his bank, this option was a complete no go so Jade had to do some research to get the best possible outcome. She started by exploring different mortgage lenders criteria around umbrella companies and self-employed people as each lender has a different stance. Once she had determined the best lenders on the market with the best viewpoint on umbrella companies, she then looked in more detail about how best to present the case.
Jade soon found a lender who was not too concerned about the fact that the client was paid through an umbrella company. Whereas the previous bank had treated the client as a PAYE employed person, this lender would disregard this and treat him as a self-employed individual. The issues that the previous bank had with the client’s pay slips were avoided with this new lender as they only required the standard self-employed documents (tax overview and tax calculation).
Because of the way that Jade knew how to present the case and because she knew which mortgage lender to approach and their criteria, the mortgage application went through with relative ease and a mortgage offer was issued in less than two weeks. The clients were over the moon and are now the proud owners of their own apartment. Not only did they get to purchase the home that they had made their own over the last six year for a great price, but they also got the best possible mortgage deal available and the help and support of an expert advisor.
What was the rate?
The loan was secured as a capital repayment and interest mortgage on a fixed rate for 5 years at 2.24%. After the fixed period, they would revert to the bank’s 4.49% standard variable rate at which time we will contact the clients to discuss remortgaging on to another new competitive fixed rate.
The overall cost for comparison is 3.7% APRC. The arrangement fee was £995 which was added to the balance of the loan, and early repayment charges were applied. The mortgage term was 25 years.
If you or someone you know is thinking of purchasing through right to buy or is having issues with an umbrella company income, feel free to give our friendly and knowledgeable advisors a call today to see how we can help you.
