Residential Refinancing to Raise Capital for a Client with a Complex Income Structure

• Client: Property developer with a complex and fluctuating income structure
• Property: Existing residential property with approximately £1.25 million of mortgage debt
• Challenge: Required capital to fund a new land purchase while refinancing an existing mortgage, with fluctuating income and some adverse credit
• Finance: Combined first and second charge facilities totalling approximately £1.77 million

Residential refinancing can become particularly challenging where a borrower has a complex income structure, existing mortgage commitments and a history of property development. Enness was approached by a property developer looking to refinance an existing residential property and raise capital towards the purchase of land for a new family home.

The client’s existing primary residence had a mortgage of approximately £1.25 million, and the existing mortgage was approaching the end of its term. The client’s bank had previously indicated that an extension would be possible but ultimately declined to refinance the existing facility, creating an urgent requirement for an alternative solution.

The client’s income added further complexity. As a property developer, income was irregular and fluctuating rather than being received as a conventional salary. The client was also only able to demonstrate the latest year of company profits for income assessment purposes. There was additionally a small amount of adverse credit associated with one of the client’s buy-to-let properties.

These factors made a conventional affordability-based refinance difficult. The application required a lender prepared to consider the client’s wider financial circumstances, complex income structure and existing property interests rather than relying solely on a standard income assessment.

Enness identified a lender with a flexible approach to high-net-worth borrowers and negotiated a first charge facility of £197,000. This was structured over a 13-year interest-only term at a variable rate of 6.37% at the time.

A further element of the financing involved a second charge facility. The lender was prepared to provide the second charge from day one, rather than requiring the first charge mortgage to have been in place for a period of several months before additional borrowing could be considered.

The lender was also able to offer a two-year rolled-up residential second charge facility for borrowers meeting its relevant high-net-worth criteria. The client’s net assets met the lender’s stated threshold of £3 million, allowing the application to proceed on this basis.

The resulting second charge facility provided a further £1.57 million on a two-year interest-only term, with the interest rolled up for the duration of the facility. The combined first and second charge borrowing provided the capital required to support the client’s plans for the new property.

The client intended to move into the newly built property after approximately 12 months and subsequently sell the existing residence. This would allow the existing property to be sold and the associated borrowing repaid as part of the client’s longer-term financing strategy.

The case demonstrates how specialist residential finance can provide options for borrowers with complex income structures and more unusual funding requirements. Where conventional affordability assessments are restrictive, the availability of first and second charge solutions can sometimes provide a route to raise capital, subject to lender criteria and the borrower’s wider financial position.

For property developers and high-net-worth borrowers looking to raise capital against residential property, specialist lender access can be particularly valuable where income is irregular, existing borrowing is substantial or the proposed financing structure falls outside conventional mortgage criteria.

Disclaimer:
This case study is for illustrative purposes only and does not constitute financial, legal, tax or investment advice. Finance is subject to status, underwriting, affordability, property suitability, credit assessment and lender criteria. Terms, rates, LTVs and availability may vary depending on individual circumstances.

Risk Warning:
Your property may be repossessed if you do not keep up repayments on your mortgage or other borrowing secured against it. Property values can fall as well as rise. Second charge borrowing can be more expensive than first charge mortgage finance and may increase the total cost of borrowing. Interest-only and rolled-up interest facilities require a suitable strategy for repaying the capital and any accumulated interest. Borrowers should carefully consider their ability to meet all obligations throughout the term.