Scenario:
Our client was a senior executive at a technology company with a remuneration package comprising both a substantial salary and Restricted Stock Units (RSUs). They had identified a property with significant potential and wanted to purchase it as their future family home.
The property required extensive refurbishment and reconfiguration, including conversion from three self-contained flats into a single residential dwelling. To fund the purchase, the client wished to release equity from their existing home, which already had a mortgage at approximately 50% loan-to-value, rather than using cash reserves.
Challenges:
The transaction required a highly leveraged funding structure. The client needed to increase borrowing on their current residence to 90% loan-to-value while also securing 90% lending against the new property.
Many mainstream lenders would be uncomfortable with both the high level of borrowing and the nature of the property being acquired, particularly given the planned conversion works. The client also wanted maximum flexibility, as their intention was to sell their existing home once the refurbishment had been completed and they had moved into the new property.
A traditional development or bridging facility would likely have resulted in higher costs and restrictive exit conditions.
Solution:
We structured a bespoke funding solution through a private bank that was able to take a holistic view of the client’s financial position, including both their salary and RSU income.
The lender agreed to provide 90% interest-only mortgages on both the existing residence and the new property on a dry-lend basis, removing the need for specialist development finance or bridging finance.
Importantly, the facilities were arranged without exit penalties, giving the client complete flexibility to sell their existing home once the refurbishment works were complete and repay the borrowing without incurring additional costs.
Key figures:
Combined property value: £3.2 million
Loan amount: £2.8 million
Repayment type: Interest only
Product type: 2 year tracker
Interest rate: 1.15% over BOE base rate
Arrangement fee: 0.5%