LOOKING TO REMORTGAGE MAIN RESIDENTIAL PROPERTY

CLIENT SCENARIO

This particular client was formerly worked as a Chief Financial Officer in a global food chain. As base rates in the UK have softened, we have seen a reduction in mortgage rates. Our client’s initial fixed rate mortgage term was coming to an end and was about to be switched to a standard variable rate (SVR) with their existing lender. This would have seen a huge increase in mortgage interest payments far less than the competitive rate in the current market.
So, the scenario was;

Client: Former CFO with an excellent profile
Income: High net worth individual
Property value: £3 million
Property ownership: Main residence
Existing loan: £900,000
Mortgage interest rate: About to revert to the lenders standard variable rate
LTV required: 30%
Mortgage type: Interest only
Though the client was very wealthy with a lot of assets they had recently left their employment and were unemployed at the time of the refinancing. Usually, this would have meant failing the traditional mortgage affordability test however, they were receiving another form of income in shares and a future restaurant. This arrangement is quite common amongst those with high profile jobs who leave employment after which they can have access to deferred income in the form of stocks, shares and other benefits.
At this point, it is worth pointing out that not all mortgage lenders will recognise this as a type of income.

ISSUES TO ADDRESS
The main issue with this case study revolved around the client’s current employment. They were not working at the time of the remortgage so there was no traditional form of income. They were, however, able to access other streams of income in the shape of cash and stocks which we would use when looking at mortgage affordability test.

In summary, the issues to address were as follows:-

Income: Limited to deferred cash/stock unemployment
Refinancing: £900,000 like-for-like remortgage
Interest rate: Fixed term ending and switching to standard variable rate
Mortgage LTV ratio: Circa 30%

Everything focused around the fact that at the time of the refinancing our client was not in employment. They had a track record of credit and excellent profile among their industry having spearheaded one of the largest food chains in the world. We were able to use the reputation of the client together with deferred cash/stock income to be able leverage their position in the mortgage market.

THE SOLUTION

As a mortgage broker we have access to more than 300 the United Kingdom and international lenders. This variety of lenders includes a range of niche participators who specialise in unique and bespoke needs. Though the use of deferred income is more commonplace amongst high profile executives, not all mortgage lenders will recognise this form of income when looking at mortgage affordability.

There were a number of issues here which included the source of income together with the fact the client’s existing mortgage was about to switch from a fixed rate to the much higher standard variable rate. Time was of the essence and we needed to find a niche mortgage provider who would fully appreciate deferred income streams and was prepared to act quickly!
After we contacted appropriate lenders we were able to secure funding on very competitive terms.

Funding partner: Small building society
Property value: £3 million
Mortgage funding: £900,000
LTV ratio: 30%
Mortgage duration: 10 years
Mortgage type: Interest only
Mortgage rate: 2.20%

By approaching mortgage lenders we knew operated in this particular field we were able to negotiate a competitive rate.

As a consequence of our contacts in the marketplace, the client was able to continue making minimum payments towards their mortgage despite the fact they were unemployed.

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