A self-employed couple approached me recently as they were planning on making a new build purchase, valued at £1.75 million in Wiltshire. The situation was fairly complex as they were offered a part-exchange by the developer who wanted to expedite the new build purchase.
My clients wanted to raise as much money on the new purchase as they possibly could and ideally were looking for 70%. Neither of them had experience in searching for a million pound plus mortgage on a new build purchase. They were not aware of the obstacles of raising money when being self-employed and owning your own company.
One of the main problems which they were met with was that they had a limited company and not many lenders are willing to consider net profit before tax and salary. Most lenders will instead consider dividends and salary, which can mean a persons’ income appears lower than if they had a comparable employed, PAYE salary. At this level this was not sufficient to support the level of borrowing for their purchase and as such the main challenge for this million pound plus mortgage on a new build purchase was affordability.
I sourced a private bank who were happy to look at the clients’ net profit before tax and salary when assessing affordability. However they said that they would cap any level of borrowing over one million at 60% of the property’s value. After speaking to the bank and their senior management I persuaded them to tailor a product up to 65%, allowing them to borrow £1,137,500 of the purchase price. This did, however, still leave us needing an extra 5%, £87,500.
I decided that the best solution for this was to get a second charge loan with a different lender. I secured the second charge at a rate of 9.2% for the remaining £87,500. My clients were happy with this solution as they planned on paying this portion of money off within 12 months.
The terms of the new build purchase were that the 65% mortgage was set as a 2 year fixed rate at 2.79% on a full repayment basis. This particular solution worked perfectly for my clients as it meant that they were able to borrow the amount they needed in order to secure the new build purchase they had always dreamed of.