- Client: High-earning professional with significant annual bonus income
- Property: West London family home valued at approximately £3.75 million
- Challenge: Required approximately 85% LTV while managing substantial ongoing household expenditure
- Finance: Interest-only mortgage of just under £3.2 million with planned annual capital reductions
Arranging a large interest-only mortgage against a family home can be challenging, particularly where a borrower requires a high loan to value (LTV). Enness was approached by a high-earning professional looking to purchase a property in West London valued at approximately £3.75 million.
The client wanted to borrow just under £3.2 million, creating an LTV of around 85%. This was significantly higher than the level of leverage many lenders would typically consider for a residential property of this value, where a larger deposit is often required.
The client had a strong income comprising a substantial salary alongside significant annual bonuses. However, the overall affordability position was affected by considerable ongoing household expenditure. The client therefore wanted to structure the mortgage on an interest-only basis to keep regular monthly commitments lower.
The challenge was finding a lender comfortable with both the size of the borrowing and the proposed repayment structure, while also establishing a credible strategy for reducing the outstanding capital.
Enness identified a lender with a flexible approach to high-net-worth clients and presented the client’s wider financial position and proposed repayment strategy. The lender was prepared to consider the application on an interest-only basis, provided planned capital reductions were made over the term.
This structure allowed the client to use a proportion of annual bonus income to reduce the mortgage balance periodically, rather than committing a larger amount of available liquidity to higher monthly capital repayments throughout the year.
The resulting facility was secured at a fixed rate of 2.75% at the time, with annual capital reductions planned from the client’s bonus income. Under the agreed strategy, these reductions were expected to bring the LTV down towards 75% after three years.
The structure provided the client with the high LTV required at the outset while giving the lender a clear route towards reducing the outstanding balance. It also allowed the client to manage ongoing financial commitments while retaining greater liquidity between annual bonus payments.
The case demonstrates how a large mortgage can sometimes be structured around a client’s wider income and repayment strategy rather than relying solely on a conventional capital-and-interest assessment. For borrowers with significant variable income, an interest-only mortgage may provide a suitable structure where there is a credible plan for repaying the capital, subject to lender criteria.
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Property values can fall as well as rise, and you may not get back the amount originally invested. Property investments can be illiquid and may take time to sell. Where borrowing is used, your property may be repossessed if you do not keep up repayments on a mortgage or other loan secured against it.
