Our clients were a husband and wife involved in different businesses. The 1st applicant had a 16% shareholding in a well-established family business, the 2nd applicant had a 40% shareholding in a business that they had only bought into 2 years previously. The clients were looking for a £1m loan on a £1.5m property.
A solution was found by engaging with a specialist high value underwriter at a major bank. Through this we were able to secure the client’s desired terms at a highly competitive rate.
The clients faced several issues. Firstly, many banks will not consider dividend income if an applicant owns less than 20% of a company. The second issue was the fact that the 2nd applicant had only been a shareholder in the company for 2 years. In many instances banks are looking for a 3-year trading history.
Finally, the 2nd applicants’ company had made a loss in one in the first year of the applicant’s involvement with the company. Many banks will decline an application if a company has made a loss in the last 3 years. We engaged with the high value team of a major mortgage lender with whom we have an excellent working relationship.
After negotiation the banks was prepared to allocate 16% of the 1st applicants business net profits, averaged over the last 2 years in addition to her director’s salary. They agreed a policy exception to allow for the small loss as we evidenced that the company had returned to profit and was trading well.
The lender then agreed to add 40% of the latest years profits to the affordability calculation, although we had to absorb some losses in the previous year’s figures. By calculating the income in this way, we were able to get to a combined average income sufficient to support a £1m loan.
“We engaged with the high value team of a major mortgage lender with whom we have an excellent working relationship.”
Arthur Hamilton
The rate obtained was a very attractive 5 year rate. Additionally, despite the 2nd applicant being 54 years old, we were able to stretch the term to age 80 to keep the monthly costs as low as possible.
This type of situation is not uncommon, and it is one we come across on a regular basis. The clients had realised that their situation was complex and had reached out to a few brokers already, but they had failed to identify a solution. The client was absolutely delighted to have secured the mortgage they required to enable them to purchase their desired property.
