Complex £640,000 offset mortgage for business-owning and landlord client

What was the situation?

I was approached by my business-owning client whose current deal had come to an end. They were looking to refinance their family residence and wanted to borrow £640,000 to repay their existing lender, against their current property worth £1,800,000, on a full interest only basis.

What was the issue?

Having previously received a cash windfall, the clients wanted to store their money and use this to lower their mortgage payments whilst waiting for another opportunity. However, they did not wish to formally overpay their mortgage as they wanted quick access to these funds if required in the near future. They had approached their current lender directly. However, despite having a long banking relationship, the lender advised they were unable to assist.

Due to the client’s business structure, the recent drawings made from the business had been from retained profits. This posed an issue for some lenders as they would typically cap the income at the net profit noted on the most recent set of company accounts, which in turn would reduce the lending.

Furthermore, the client was also a portfolio landlord with multiple mortgaged properties on their books. This meant that some lenders would automatically count themselves out as they do not lend to applicants with four or more mortgaged properties. One property had also undergone renovations and was not yet income generating. Unfortunately, this would be counted against the client when running the affordability model along with their other commitments.

What was the process?

By thoroughly assessing the client’s financial accounts, it was clear that their business was very profitable and had good levels of retained net profits.

This application had multiple levels of complexity, therefore I knew I had to approach a lender that would consider all aspects including deriving the income from the tax calculations. At LDN Finance, our outstanding relationships with lenders mean we have access to exclusive schemes. One of these, in particular, was a good solution to what the client required, therefore I presented the case to a senior underwriter and obtained pre-approval. This meant that the application could be processed swiftly.

Knowing that the clients wanted to retain access to their money instead of repaying their mortgage, I recommended an offset mortgage. This allowed the client to park their cash in a savings account, whilst the balance would be deducted from the interest payable on the mortgage. The client had the option of either reducing their mortgage payments or decreasing the overall mortgage term.

Despite overcoming two big obstacles, the final hurdle to overcome was the affordability squeeze we faced due to the unlet background property. Luckily, during the application process the client had marketed it and we were able to evidence this to the lender. Due to the client’s strong wealth profile, the lender was happy to disregard the background mortgage payment on production of a letter from the agent confirming the future rental income. Instead, they used the income generated from the overall portfolio towards securing the desired loan amount.

What was the solution?

The lender was able to work off the affordability from the clients’ drawings without any limitations. Furthermore, they would accept the rental income from the background portfolio, which allowed us to secure the client’s desired loan amount.

With the offset account set up at the point of completion, the client was able to transfer their funds and benefit from a reduced monthly payment but retain access to these funds.

We were able to secure a competitive interest only fixed rate product over a 35-year term at 60% LTV. This provided sufficient funding for the clients to remortgage to a new product and preserve their cash for future opportunities.

Lending solutions with LDN Finance

Are you looking to purchase new property? We’re here to help you find a solution – no matter how complex your circumstances. At LDN Finance, our expert brokers have extensive experience in providing creative solutions to secure large loans for our clients.

We work closely with our trusted network of private banks and both high street and specialist lenders to arrange bespoke mortgage arrangements to suit your circumstances at competitive, market-leading rates.

Get in touch with us to organise an initial consultation.