I recently arranged a second home purchase for a self employed client who was in his late 60s. As well as his age and income structure, the nature of the property in question made this case an interesting one.
My client was based in Manchester, where he ran an appliance centre set up as a limited company. His wife was also self employed, operating as a sole trader. He also had a portfolio of buy to let properties in the Manchester area, mostly commercial, from which he was generating rental income. They were looking to purchase a second home in Cumbria.
Once a borrower reaches a certain age, many lenders will only take their pension income into account when testing affordability. In this case, we needed his actual income to be considered in order to pass affordability tests. I was able to find a lender prepared to take actual income up to the age of 75.
Initially, they planned to raise the funds against the property they were purchasing rather than against their existing residence. My client’s wife was apprehensive about being named on a mortgage in case something were to happen to her husband, leaving her with debts.
The Cumbrian property, however, was slightly unusual; it was actually two separate properties. Getting one mortgage on two titles is difficult and expensive and this, combined with the stamp duty changes, meant there were cheaper options for us to explore.
One possibility was raising the finance against his buy to let properties. As these were commercial premises, however, the rates were likely to be very high.
After reviewing all their options, it became clear that by far the cheapest option would be to raise the loan against their unencumbered main residence. To put their minds at rest, I introduced them to James Ferguson, head of Enness Wealth – our in-house protection and wealth management team. He was able to put a policy in place for them to provide security in the event of anything unexpected.