If you are looking for a large interest-only mortgage, a recent case of mine may be of interest to you. This was a challenging case in several regards, but I was happy as always to find an excellent solution.
My client was buying a beautiful home in West London, valued at £3.75million. In order to buy this property, he hoped to take out a loan of just under £3.2million, which would create a very high loan to value (LTV) of around 85%.
This was the first problem; when it comes to a property of this size, most lenders will demand at least 25-30% as a deposit, which is a significant sum on a property of this value.
The second issue was the repayment structure my client required. He had an excellent salary and received significant yearly bonuses, so his overall income was very strong. However, he also had several dependent children who were in private education. This meant he had substantial monthly outgoings once school fees were factored in.
As such, he was hoping to take out a large interest-only mortgage which would enable him to minimise his monthly repayments. Offering such large loans on an interest-only basis is often considered quite risky by lenders, especially if the property is a residential property. This is because, unlike a buy-to-let property, the eventual strategy for repaying the debt is not so clear if the property is a family home.
Fortunately, I found a solution by working closely with a lender whose holistic and common-sense approach to high net worth clients makes them an ideal match for many of our cases. I have an excellent relationship with this lender; in this case, I was able to negotiate for a fixed rate of 2.75%. This would also be an interest-only facility, wherein my client would pay down chunks of the loan on a yearly basis.
These capital reductions could be funded by his large yearly bonus payments, without causing a strain of my client’s liquidity throughout the year. These annual repayments would bring the LTV down to 75% after three years, which was preferable for the lender. This case is a prime example of how we work with the best lenders on the market to find creative and flexible solutions for our clients.
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