Key facts:
Client found his dream property after an extensive search and wanted to make a 2nd property purchase.
Already owned a residential property and wanted to keep this as a 2nd home. However, this was unaffordable to do due to the expense of having two properties.
Decided that best route forward was to keep home and rent it out as a self-financing property. But, most lenders wouldn’t accept this unless the property was already let on the market.
Client risked losing his perfect home.
Our client:
Our client approached us to ask if we could help him purchase his ideal home. After months of searching, he had found a property that was perfect in every way for him and his family. He wanted to make sure that he was first in line to snap it up.
The first issue arose when our client decided that rather than selling his current home. He wanted to try and keep his old home as a 2nd property and use the new one as his main residence. After looking into his mortgage affordability with two properties as credit commitments, most mortgage lenders would not be willing to lend him anywhere near enough unfortunately.
How did we help?
Our advisors developed a solution for the client that would enable him to not only keep his current property but also boost his mortgage affordability. The only route forward for him was to keep his current property as a rental home and list the property as a self-financing buy to let. This meant that we would not have to include any mortgage or running costs in the new mortgage affordability.
Here’s where the second issue arose.
All the lenders that we approached for the new mortgage specified that our client’s current property needed to have been rented out for a minimum of 3 – 6 months before they could consider it self-financing. As our client was still living in his property, this was not achievable. Our advisors had to use the exclusive resources we have access to and find a more specialist lender.
After some research we managed to find our clients a lender who had good rates, attractive products and, would class the current property as a self-financing rental property without needing it to be already let. The only requirement the lender had was that they would need to see a letter from a professional letting’s agent detailing the expected rental income for the property when it is eventually let.
Now that most of the sticky points had been resolved and we had found our client the perfect lender for his circumstances, the third and most tricky issue arose.
Although we had found a lender who was willing to give our client a mortgage, there was still a shortfall with the mortgage amount as the lender was not willing to lend quite enough. As we were limited to lenders, and he did not have any more deposit of his own to put down, we had to explore alternative options again.
The first consideration that we made was whether or not we could remortgage his current home and release some equity from it. He could use the money top up his deposit. Once our advisors looked into the particulars of his current mortgage deal, we realised that this would not be an option as he was liable to extra fees from his current lender if he remortgaged. We were then made aware that his wife actually owned her own rental property in the background, and she was willing to remortgage this property, and that’s exactly what we did for the clients. We remortgaged the existing rental property and released some equity that was tied up in it. Our client used this equity to top up his deposit making the purchase of the new residential home affordable.
The fourth and final issue that we tackled was that our client was almost 60 years old and wanted a mortgage for a long time so that his monthly repayment figures were as low and as manageable as possible. As most mortgage lenders will lend until retirement age and as we were limited to lenders, this would normally be difficult to resolve. We managed to get the mortgage lender to agree to lend to our client over the age of 70, extending the term and reducing the monthly repayments significantly which he was very happy about.
Our client is now the owner of a new dream home with a great mortgage lender as well as his old residence and couldn’t be happier.
What was the rate for the 2nd property purchase?
The loan was secured as a capital repayment mortgage for the 2nd property purchase on a fixed rate for 2 years at 1.67%. After the fixed period, they would revert to the bank’s 3.99% standard variable rate. At which time we’ll contact the clients to discuss remortgaging onto a new competitive fixed rate.
The overall cost for comparison is 3.4% APRC. The arrangement fee was £999, and early repayment charges were applied. The mortgage term was 14 years.
