Scenario:
The client approached us after speaking with several brokers, all of whom could not find a suitable lender. Our client had a mixture of stocks and property worth over £3 million but a relatively low income. Rental income funded their day-to-day life and shares were sold as and when required to fund larger purchases. They were now looking to upsize property however this was proving challenging due to the non-standard circumstances.
Challenges:
The client was, by definition, HNW in terms of assets but their income did not fit the profile for mainstream lenders. The issue with standard banks is they have to adhere to rigid affordability rules and do not take into account the overall wealth situation no matter how wealthy the individual is. Mainstream lenders will also assume the worst case position and in this case the income would be deemed unsustainable.
Solution:
Magni Finance are experts at obtaining finance for clients with tricky situations and thinking outside of the box. On paper, the clients income was low. However, when looking at the overall wealth, it was clear they could afford to maintain their lifestyle and were living well within their means. Private banks are the go-to solution in this scenario. Rather than looking at standard mortgage options, a private bank can provide bespoke finance solutions that meet the needs of wealthier borrowers. Lombard finance is another form of finance private banks can offer. This involves lending against liquid assets, in this case, the stocks portfolio. The benefit of this is rates are considerably lower than traditional mortgage rates, normally around 1% above base. This private bank were able to split the debt across the property and stocks portfolio, bringing the loan to value to below 50% and offering an extremely competitive blended rate.
Key figures:
Property value: £1,650,000
Loan amount: £950,000
LTV: 60%
Repayment type: Interest only
Product type: 2 year tracker
Interest rate: 1.87%