I recently helped a client secure a £570,000 interest only remortgage on his UK residential family home, despite having three people already on the mortgage. This was set to be a challenge right from the outset, as the majority of lenders will stick to a maximum number of two people on one mortgage.
This was not the only complication we faced, however, as one of these individuals was also aged 62. This had the potential to be an issue with almost every lender on the high street because the mortgage term would surpass his retirement age.
If that wasn’t all, the mortgage with the current lender was a low-start mortgage on total interest only. This is where the first two years are on interest only and will then transfer to a repayment mortgage once the two years are up.
Low-start mortgages are unique in that the client can benefit from interest only payments for the first 2 years and then the mortgage converts to a capital repayment mortgage for the remaining term. However, the client did not want to have a capital repayment mortgage and as such was facing the prospect of seeing their mortgage payments jump up significantly, as not only were they due to go on to their current bank’s higher standard variable; they were facing the prospect of a double whammy of having to pay additional capital repayments each month.
He also had a buy to let property portfolio in the background that he was relying on for equity as a repayment vehicle.
Despite the challenges faced, I was able to persuade a lender to consider all three applicants and take my client’s current income and buy to let portfolio equity into account when calculating affordability, rather than the pension income of the older applicant.
I managed to secure an interest only remortgage with a 22-year term – taking the oldest borrower to the age of 85 (which is much higher than the maximum lending age limits found on the high street) – all at a 2 year discounted rate of just 2.14%.