My client was looking to buy a new home in London—a listed property—but wanted to completely refurbish his new home before moving in. He then planned to sell his old home to repay the borrowing. However, there were a variety of issues preventing him from achieving this.
For a start, my client had recently left his job in finance to begin his own business. Whilst it is very much possible to secure a mortgage as a self-employed earner, this is more difficult if you cannot show several (typically three) years’ worth of accounts. Lenders will look to see that you have been able to generate a sizable enough income to support your mortgage repayments. Unfortunately, my client was in the process of setting up his own business, so it was not possible to provide the necessary accounts.
As an additional complication, the nature of my client’s new property created a problem. Arranging a mortgage on a listed property is often a challenge. Many lenders will not lend against listed buildings, as their unusual nature means fewer buyers are interested in buying them. Lenders are therefore concerned about the resale of such properties.
For short term finance, a bridging loan can often be an appropriate facility. However, bridges secured against residential properties are significantly more expensive than conventional mortgages, and are also only available for short terms, usually 12 months. I needed to use a creative approach to secure a mortgage for this listed property.
Fortunately, I have a strong working relationship with several senior contacts at a private bank. This lender takes a bespoke approach and is therefore comfortable with creative structures, but also offers competitive pricing.
I arranged an 18-month interest only mortgage, instead of a bridge. My client placed 18 months’ worth of interest with the bank in a deposit account to effectively service the mortgage, which also meant my client could focus on refurbishing his property and establishing his business.