Scenario:
The client was a 75% shareholder in 4 companies. These companies were owned by a holding company which the client also owned 75% of. The companies were very profitable however over the past few years, the client had not taken much out of the business. They were now looking to purchase a £1.5m home and wanted to put down as a little as possible deposit to avoid having to withdraw more funds from the business and face a large tax bill.
Challenges:
There are now more lenders able to accept net profits (after corporation tax) however many lenders will only accept this where the borrower is a 100% shareholder of the business. In this case, the client only owned 75%. With the loan amount being above £1m, most lenders also require a 20-25% deposit. Our client ideally wanted to put down a maximum of 15% deposit with as much as the loan on interest therefore our options were extremely limited.
Solution:
The lender we approached requested the last 2 years accounts from each company to establish there was sufficient funds to draw on to meet mortgage and lifestyle costs without affecting the profitability of the businesses. With the accounts showing turnover and profits significantly increasing year on year and a detailed reference from the clients accountant, we secured a mortgage at 85% loan to value with a high street bank.
Key figures:
Property value: £1.5 million
Loan amount: £1,275,000
LTV: 85%
Repayment type: Part interest only
Product type: 2 year fixed
Interest rate: 5.54%