My client, an entrepreneur, set up a new company two years ago and remained self-employed in this new venture. His circumstances meant he needed a low income self-employed million pound mortgage.
He had a property he had been living for the past few years in Ascot worth £3 million with an existing mortgage of £530,000 and also a second charge loan of £350,000. His plan was to rent out the current property and move to a property in Hampshire which was closer to his children’s school.
The new property had a purchase price of £975,000. He wanted to consolidate the loan in its entirety and ideally purchase the new house outright, mortgaging the current property as a buy to let. This meant that in total my client needed to borrow £1,855,000.
However, although my client had historically earnt a lot more at a previous business he had built and sold, his last couple of years’ accounts were not sufficient to cover the loan. On top of this he had a young family and school fees, amongst other outgoings, were a consequence of this. Since the Mortgage Market Review (MMR) when the lending rules were changed last year, lenders tend to shy from borrowers who have larger outgoings as they make them uncomfortable.
We decided the best approach would be to talk to a tailored, specialist lender who are happy to make concessions for entrepreneurs if you can prove past successes.
The fact my client only had 18 months’ accounts was an obstacle in obtaining this low income self-employed million pound mortgage. Most lenders will only offer mortgages to the self-employed at this loan to value with three years account. However, I managed to persuade my client’s accountant to produce interim accounts and also to demonstrate my client’s historical earnings by showing the net profits at his previous company.
On top of this I stressed my client would be subsidising his income from the revenue letting out his house would provide – £10,000 a month. This improved his affordability.
I assured the lender that both these properties were secure investments and assured him of my client’s capability. This strategy was successful and I obtained the low income self-employed million pound mortgage at a rate of 4.19% over a 25 year term. I also made sure there were no early repayment charges on the loan; presenting my client with the option to remortgage in the future when his new venture is a success.