Case Study – Purchase of a £3,550,000 Property With A 85% Interest Only Mortgage, Exchanged in 4 weeks
The most important thing when looking at borrowing for high net worth clients is the structure of the debt. The second most important thingis being able to deliver in a timely manner, so we believe this case study is a great example of this.
This client first initially contacted us around a year ago looking at their options. There were a few initial speed bumps to consider. The clients had recently moved to the UK, which meant their previous bonuses were not paid in the UK. We had to rely on previous bonuses to be able to stretch the lending for the desired amount. There were no investable assets to put under management. Usually lending at this level, lenders require asset under management especially when borrowing such a high LTV on interest only. The bonuses paid were not always in cash elements. The final issue was the tight deadline we had to reach, due to our clients circumstances we had to exchange in 4 weeks and complete the following month.
After looking at the situation and how the client’s income was structured it was clear that the mortgage would only work if interest only was possible. After reaching out to our Private Banking contacts we managed to find a solution to fit with the client’s situation. The structure looked as follows.
Purchase price – £3,550,000
Borrowing – £3,017,500 (85% LTV)
Agreed to pay down a bullet repayment of £100,000 each year for the first 2 years of the mortgage
This worked as the client was paid their bonus at 2 points during the year. This allowed our client to manage their own cash flow with comfortable monthly repayment whilst still reducing their own personal risk of such a large mortgage.
After agreeing such a great outcome for the client the race was on to get to the 4 week exchange. With everyone pulling together including the surveyor, bank, agent and solicitor we managed to exchange in the time period and have a great outcome for everyone involved.