I recently secured an interest only debt consolidation mortgage of £1m. My client in this instance was an insurance underwriter earning £260,000, with a bonus which almost doubled his salary. His property was valued at £2m.
He already had a mortgage against this property, but on a bad rate. He was looking to remortgage on interest only to get a better rate but also in order to consolidate his debts.
Although there were no problems with affordability, there were a couple of tricky points for me to take into consideration. Lenders generally run a mile from interest only loans for debt consolidation, preferring the mortgage to be on capital and interest. Moreover, my client planned to make his repayments by periodically downsizing, a method which many lenders see as shaky; there is always a chance that property prices will fluctuate, in which case they could lose money.
Of the £1m he wanted, there was to be £100,000 of consolidated debt and £650,000 to repay his existing mortgage. There was £250,000 left over, with which he planned to purchase a buy to let. Most lenders are unwilling to part with such a sum unless the borrower already has a specific property in mind. My client hadn’t yet found a property he liked, and didn’t want to feel rushed while he was searching.
There were a few complications and the case needed to be well-structured, thoroughly thought out and pitched to exactly the right lenders in order to get the result my client wanted.