Second charge mortgage for self-employed client wishing to consolidate debt

Key figures:

Second charge

£875,000 property

£680,000 capital raise

3.74% fixed

5-year term

 

The client:

This client returned to me after having completed a deal a couple of years previously. He was self-employed within financial consultancy and was also a partner in a financial services company. He was married with two young children.

 

The property:

The property was in a popular area of South London and valued at £875,000.

 

What were they looking for?

He was looking for a second charge to consolidate some debt. The debt had built up from paying for the couple’s wedding and property renovation costs.

 

Why was it difficult?

Debt consolidation is not a simple process. We would need to find a lender who would be comfortable dealing with the client’s level of debt to his income. The lenders that we approached in the first instance simply wouldn’t consider the application. Many lenders have restrictions on how much they can consolidate (typically up to £40-50,000).

To add to this, my client had two streams of income – something that lenders are particularly cautious of. In fact, a lot of mainstream lenders will take 50% of the second income source to cover the debt, which was not an option in this case.

Clearly, some thoughtful research was necessary.

 

What was the process?

We have connections with a lender that, uniquely, has no income-to-debt ratios. They were able to look at the overall merit of my client’s credit position.

They were able to consider the total of his two income streams as they were recorded in a self-assessment (SA302). This proved his affordability, allowing my client to raise enough to consolidate his debts.

 

The solution:

This lender can look at the previous year’s income figures to offer a loan amount, and if the client’s income is over £100,000 pa. they can offer up to six times the income.

We secured borrowing of £680,000 on a 5-year fixed product at a rate of 3.74%. This solution not only covered my client’s outstanding debts but also released enough to also purchase a vehicle.

 

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