A client approached me looking to purchase a main residence at £960,000 and wanting to borrow £600,000 (63 per cent loan to value). The deposit had come from the client’s own resources following the sale of a business.
My client had set up a software manufacturing business three years ago and had invested a significant amount of his own capital in the venture. The accounts for the business to date showed that the company was breaking even at best with the client taking his income in the form of loan notes.
However, the business was about to become profitable with my client set to receive a salary of £20,000 per month from the company. He needed a lender to grant him a mortgage based on business projections.
Most high street lenders would not have been able to agree this loan because the company accounts did not show sufficient profit. Additionally, the loan size was not sufficient enough for a private bank to consider. So, I had to find a lender who was able to agree the mortgage based on business projections and performance over the next two years and the fact that my client was about to begin drawing a salary of around £240,000 per year.
My client’s accountant was able to produce projections for the business for two years, confirmation that my client was set to begin taking a salary of £20,000 per month and that this salary would not adversely affect the performance of the company. They were also able to confirm that my client had been drawing this sum every month in the form of loan notes. I was also able to provide proof of my client’s deposit.
With this, I was able to agree the full £600,000 mortgage with a regional, mutual building society. My client benefited from a 0.4 per cent discount from the lender’s Standard Variable Rate of 5.39 per cent until March 2015 (pay rate 4.99 per cent).
In cases where a client has to prove that a business is set to grow quickly and that the existing accounts do not support the mortgage required, specialist underwriting is crucial. I was able to use my underwriting contacts at a smaller lender to agree a large mortgage which most mainstream lenders would have declined immediately.