Scenario:
The clients were selling their existing property and buying a new home with cash. However, when their buyers pulled out of the purchase, they urgently required a mortgage to buy the property and got in contact with us. Fortunately, the borrower had sufficient cash available for the deposit that would allow them to proceed if they could borrow the amount required.
Challenges:
The borrower already had a large mortgage on their existing property and due to the timescales, this mortgage would not be redeemed before completion of the new purchase. Having two mortgages at the same time would mean a significantly higher monthly mortgage payment than they had anticipated until the existing property was sold.
Solution:
A bridging loan could have been arranged as a short term solution but this would have been expensive and in this case unnecessary. The client was a managing director within a bank and had a substantial income. The broker found a high street bank who could offer high income multiples on a part interest only basis. This would keep the monthly payments low, giving the client a little more breathing space as both mortgage payments would be manageable. Furthermore, the new mortgage was a tracker rate with no early repayment charges so the borrower would be able to pay off some or all of the loan once their current property was sold, without incurring any early repayment charges.
Key figures:
Property value: £1.6 million
Loan amount: £1.1 million
LTV: 70%
Repayment type: Part and part
Product type: 2 year tracker
Interest rate: 0.85% above base