One of my most recent successes to date was working with a client who worked in insurance and came to me in order to explore her options before setting her mind on a house. She had lived and worked in London up until that point but had decided to move to the country. Her income was £450,000 per year.
When she came to me she believed that she had two options – either that she would have to sell her existing home in the city, (which was valued at 2.5 million pounds) in order to fund the purchase of her new country residence or that she could keep the London property as a buy-to-let and buy a smaller multi-million pound country residence in the region of 3 million pounds instead of the 4.5 million pound mark, which was her preference. This would mean arranging a let to buy mortgage with us.
I decided to structure this multi-million pound loan in a way which would give my client the flexibility to fully explore her options. After speaking to a private bank they were happy to offer her the opportunity to keep her London flat as a pied a terre through a let to buy mortgage whilst at the same time viewing properties in the country up to a value of 4.6 million pounds. My client eventually settled on a property worth 4.2 million pounds.
The loan was structured in such a way that my client would need to borrow 70% (2.74 million) on the new country house and 75% (1.87 million) on the pied a terre in London. In total this meant that she would have to borrow c. 4.8 million pounds.
However, new regulations earlier this year changed the way lenders assess applicants and under that model most would not consider lending this amount against her salary. I persuaded the private bank to whom I was speaking to make an exception and fully consider her circumstances which then supported this level of borrowing.
I was able to persuade them to consider her bonuses, although these were more complex as they vested at different points, due to the fact that bonuses fluctuate they are harder to use as leverage with the affordability checks but I worked against this with the lender.
The client decided that the only way for her to sustain this loan would be to have a monthly budget of £10,000. The only way to achieve this would be an interest only solution. However, the private bank we were working with had a policy of 65% as the maximum level of interest only borrowing on the purchase so this circumstance did not meet her requirements.
Ultimately, I managed to get the private bank to agree to a mortgage facility of five years for the loan, at 65% of the value of each property, with the added concession that the shortfalls of £210,000 on the main residence and £250,000 on the pied-a-terre would be provided as separate facilities over two years and to be repaid in full during this time.
Effectively, neither I nor the private bank I am speaking of have ever structured a loan in this way and the structure had to be approved by numerous bank committees. However, the process only took two months and the client was very happy as we did not need to overstretch her and we achieved payments at a level she could afford. She also had the option to pay with vesting stock.
The main residence mortgage was structured with £2,730,000 on a 5 year facility and the remaining £210,000 on a 2 year facility. The Pied-a-terre – £1,625,000 – was structured on a 5 year facility and the remaining £250,000 on a 2 year facility. The total borrowing was arranged on an interest only basis with a tracker rate of 2.49% and no early repayment charges, which suited my client excellently as she required flexibility in the future to potentially turn her pied a terre into a buy to let.