One of my recent cases was a holiday home purchase on interest only for a client who had just been turned down by a high street lender.
My client’s main residence was in London, and he was looking to buy a second home in Kent to be used as a weekend bolthole. He had initially approached a high street lender, who turned down his application after he failed their affordability checks. At this point, he came to Enness to see if we could help.
The rejection was down to a lot of credit card debt, as well as some weak figures in his accounts. He was a tax consultant and, along with his partner, one of two shareholders in their limited company. He was paid in a mixture of salary and dividends. Although the past year had been excellent for business, with strong profits, this was a big jump on the previous two years. The lender he approached took an average profit figure from the last three years, and on this basis he didn’t pass their affordability checks. I therefore needed to find a lender who would be happy to use the last year’s figures alone in order to secure the mortgage he wanted.
The other challenge for me was that he wanted a high proportion of the loan on an interest only basis in order to keep his monthly payments down. He did not, however, have a repayment vehicle in place – without which lenders will not offer interest only options.
I approached a lender who I knew allowed up to 70% loan to value (LTV) on interest only if the property was classed as a holiday home and its future sale was used as the repayment vehicle. They also allow ‘part and part’ mortgages, meaning the loan can be a combination of repayment and interest only.
Because this lender was happy to take only his business’s most recent figures into account, he was able to secure a loan of 75% LTV. 70% was on an interest only basis, as he had wanted, and 5% on a repayment basis. Given the various complicating factors, this was an excellent result all round.