Our client had an existing residential loan of approximately £3.5m, charged at a rate of 2.89%, which did not expire for just over a year. Specialist Mortgages had recently secured access to a new residential remortgage product at a rate of just 1.29%, which also offered a linked offset savings account. As the client in question had up to £1m which he could deposit into an offset savings account, this new deal would mean the effective net rate on his borrowing could fall to just 0.98%, fixed for the next 2 years.
If we could replace the client’s 2.89% mortgage with the new 1.29% deal, he could incur the 0.8% repayment charge and still save a substantial amount of money in the upcoming year. His monthly payments would fall from approximately £8,471 per month to £3,785 per month.
The main issue we faced was that if we wanted to secure an interest-only loan, we had to demonstrate that our client had sufficient assets to cover the £3.5m liability.
The lender did not allow the sale of the subject property to be used as the repayment vehicle for the loan. As all the client’s other property assets were of joint ownership, they also could not be used as repayment vehicles.
The client received a very high pension income; however, if this were to be used to service the mortgage payments then the value of the pension fund could not also be used to cover the interest only balance.
“This new deal will save our client a minimum of £24,000 in the coming year”
Finally, the client was aged 70 and the new lender’s maximum age of completion was typically just 75.
To resolve the situation, we developed a business case which we presented to the senior underwriters. We demonstrated that our client had diverse assets and sufficient income streams to carry the loan over a long term.
We convinced the Heads of Credit and Risk to approve policy exceptions, in order to secure the full £3.5m loan on an interest-only basis over a 14-year term (up to the client’s 85th birthday).
This new deal will save our client a minimum of £24,000 in the coming year. The linked offset savings account should also prove extremely beneficial as the client is an additional rate taxpayer.
Our client is delighted to have secured a market-leading mortgage over a long term.
