What was the situation?
I was recently approached by a first-time buyer client who was looking to buy a flat with a 5% deposit. The property in question was a lovely one-bedroom flat in an up-and-coming, trendy area of East London. My client was a young professional working in the IT industry with a combined income from both his 9-to-5 job and additional freelance work.
What was the issue?
Although 95% loan to value (LTV) mortgages were reintroduced following the roll out of the mortgage guarantee scheme earlier this year, many lenders still hold some limitations on the type of properties one can purchase. For this case, I had to find a lender who could take the full amount of my client’s two jobs, as many lenders typically only take 50% of a second source of earned income. Furthermore, we needed to secure above the standard income multiple of four and a half times which is now applied to 95% LTV mortgages and accept an equity loan.
The main issue at hand was that not all lenders accept this particular scheme I was trying to secure – these schemes are typically reserved for government initiatives like ‘Help to Buy’, which is exclusively for certain new builds, as opposed to non-government lenders. Despite this technicality hiccup, my close relationship with the first charge lender allowed us to get this setup pre-agreed prior to the application.
What was the process?
Having extensive experience in this area of the market allowed me to quickly establish that I had to find an “outside the box” solution for my first-time buyer client. When researching in and around his seemingly limited options, I focused on approaching a high street lender I knew would be best placed for the case. After exploring all resources, I reached the conclusion that the best solution was to secure a first charge mortgage with the lender for the maximum my client could borrow based on his income, with a small second charge mortgage to top up this amount. As a result, both mortgages combined with his deposit allowed us to reach the desired purchase price, to which my client was thrilled.
What was the solution?
The total loan amount allowed my client to secure a total of six times his two incomes, which was evidently much higher than the four and a half income multiple we had previously been restricted to. As the first charge mortgage lender based the rate on their lending, we managed to secure a very low two-year fixed rate facility at 1.51%. The second charge was priced at 8.49% and set up on an interest only basis to help reduce my client’s monthly payments. Landing at this successful, competitive solution meant my client was able to purchase his dream home which he’d previously been told was outside the realms of reality.
Lending solutions with LDNfinance
Are you struggling to overcome affordability criteria as a first-time buyer while trying to purchase your dream home? You’re not alone. Whether you’re struggling with the competitive housing market or need help working around a unique income setup, we’re here to help you find a solution – no matter how complex your circumstances. At LDNfinance, our specialist 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.
Case study by Romit Patel, Associate Director