I recently secured a million pound mortgage at 85% LTV for a client, using a large amount of discretionary income.
My client in this instance was the Chief Operating Officer of a London-based investment company. He was looking to raise a loan of £1.1m with which to buy a new family home. The property, which was going to be his main residence, was located in the South Downs. It had a purchase price of £1.3m.
My client was looking for a very high LTV of 85%, and there were a couple of obstacles. Firstly, the property was a new build, which lenders generally see as higher risk; an LTV as high as 85% is very unusual. Secondly, although his income was good, its structure was fairly complex.
On top of a basic salary of £100,000, last year he took home a bonus of half a million. As a 10% shareholder in the business, he was entitled to dividends; so his bonus was £100,000 cash and the rest a combination of dividends and vested stock.
Although he was a shareholder, he did not count as self-employed. He was still a PAYE employee, and it is not typical for someone categorised as such to use dividends to support a mortgage application.
We needed his discretionary income to be taken into account in order to pass affordability checks. The challenge for me was to find a lender who would look at his full income picture, and was also prepared to lend at 85% LTV against a new build.
I got in touch with a private bank I’ve used many times before, but this time went straight to a division of the bank I thought would be particularly suitable. I approached a personal contact on the credit committee directly to talk through the case.
The lender was happy to agree a loan of £1.1m at 85% loan to value. Best of all, it was on an interest only rate for 5 years, with bullet payments to allow stepped reductions at the rate of 0.5% each time.