In this case, we were approached by a couple looking to finance the purchase of a new family home for £1.5 million. The couple wanted a 75% loan-to-value mortgage.
One of the applicants is employed, and the other is self-employed, working via a limited company and paying themselves in dividends. This is a relatively common scenario for self-employed individuals, who often prefer to keep capital in their business rather than draw out all their profits, which can increase tax liabilities. However, this can make it challenging to secure a mortgage – especially to buy a high-value property – as the borrower's income doesn't always reflect the success and prosperity of their business, as was the reality in this situation.
High street lenders couldn't cater to the borrowers because the clients needed to show how the self-employed individual's income supported their affordability for the loan. However, this was not yet evidenced in a tax return, as it had yet to be filed. High street lenders also tend to prefer very vanilla lending scenarios, especially for high-value mortgages. Because one of the borrowers was self-employed with sole trader income, getting a mortgage from a high street bank wasn't possible.
We approached other lenders to explore the options for the clients, ultimately negotiating a 3-year discount variable rate with a pay rate of 3.94% with a boutique lender. The lender could take a more holistic approach to consider the clients' income and view the self-employed client's contracts and credit on bank statements rather than requiring a tax return.
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