£4 Million Property Purchase with 15% Deposit

• Client: High-earning professional with substantial salary and bonus income
• Property: London property valued at approximately £4 million
• Challenge: Required an 85% LTV mortgage with only a 15% deposit
• Finance: Interest-only mortgage with annual bullet repayments to reduce the balance over time

Securing a high loan-to-value mortgage becomes increasingly difficult as the value of a property rises. While a borrower may have more than sufficient income to support the required borrowing, lenders typically become more cautious about the level of leverage they are prepared to offer on high-value properties.

I recently assisted a client who was looking to purchase a property valued at approximately £4 million. The client had both a substantial basic salary and significant bonus income, giving him a strong overall financial profile. However, he wanted to contribute a deposit of just 15%, meaning he required an 85% loan to value (LTV) mortgage.

This was considerably above the level of leverage normally available on a mortgage of this size. High-street lenders were not able to accommodate the requirement, while most private and investment banks also had lower LTV limits for high-value borrowing.

The challenge was therefore to find a lender that could accommodate the client's preferred deposit while also taking a realistic view of his ability to service the mortgage. His bonus income was an important part of this, as lenders often apply discounts to variable remuneration when assessing affordability.

I approached a specialist lender with experience of providing higher-LTV finance at this level. The lender was prepared to offer an interest-only mortgage at 85% LTV, subject to the client making annual bullet repayments. These repayments would gradually reduce the outstanding balance and bring the facility towards a lower LTV over time.

The lender was also prepared to take 100% of the client's bonus income into consideration when assessing affordability. This was particularly important in determining the amount he could borrow and helped support the larger facility required for the purchase.

I negotiated terms which gave the client a choice of fixed-rate options. The terms secured at the time included a two-year fixed rate of 2.44% or a five-year fixed rate of 2.84%, allowing him to choose the option that best suited his plans.

The resulting structure enabled the client to proceed with the purchase while preserving more of his capital than would have been possible with a conventional high-value mortgage requiring a substantially larger deposit.

The case demonstrates how a large mortgage can sometimes be structured creatively where a client's income and wider financial position support borrowing above conventional LTV limits. For borrowers seeking a high-value mortgage with a smaller deposit, specialist lender access can be particularly important.

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 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. Higher-LTV borrowing can increase the level of debt relative to the value of the property, while interest-only mortgages require a suitable strategy for repaying the capital.