I recently secured an interest only mortgage for a self-employed client who was a freelance consultant through a limited company. This client was looking for an interest only mortgage on a large detached country house based in Cheshire (worth over £1 million), which was a joint application for him and his wife who does not work.
My client contacted me as a result of already being turned down by his main high street bank. High street lenders generally work to rigid criteria, especially when it comes to self-employed mortgages, so this was inevitably going to be a trickier case.
Firstly, my client left most of his consultancy fees in his company as retained profit and only took a modest salary and average dividends from his company, which was considered not enough for high street lenders to support a loan. Not only this, the repayment method for this interest only mortgage was the sale of the property in the future – often a standard solution for buy to let mortgages but not for mortgages on someone’s home.
This quickly became a challenging and lengthy process, but I was determined to secure the best deal I could for these clients. I decided to contact a private bank, where we ended up using profits from the company instead of my client’s income as a solution. I also managed to persuade the bank to use last year’s figures from the company as they were particularly profitable, rather than the usual average figure over 2 to 3 years.
This was a very effective solution for my client, particularly as a loan using the main residence for the repayment vehicle is an unusual solution for an interest only mortgage.
I was able to acquire a £1.1 million mortgage from the said private bank with a loan to value (LTV) of 70%, which is almost unheard of at such a high value.