Older borrowers with substantial property wealth can sometimes find that their options are more limited than expected, particularly where their income does not fit conventional affordability models. I recently assisted a client who owned a £10 million property in London and wanted to raise additional funds without replacing an existing mortgage.
The client already had a mortgage with a retail bank on favourable terms, but required a further £1.5 million to fund extensive renovations to the property before a planned sale.
As a retired borrower, the client’s current income was not sufficient to support the additional borrowing under the standard criteria of many mainstream lenders. However, the substantial equity held in the property provided important context when assessing the overall application.
The client expected the renovation works to enhance the property and intended to use the eventual sale proceeds as the proposed repayment strategy. The challenge was finding a lender willing to consider the strength of the underlying asset rather than relying solely on conventional income-based affordability.
OUR SOLUTION
Rather than refinancing the existing mortgage and potentially losing its favourable terms, I recommended exploring a second charge structure. This would allow the client to raise the additional capital required while keeping the existing first charge in place.
I approached a flexible specialist lender that was prepared to take a broader view of the client’s circumstances and the substantial equity in the property. The lender was comfortable considering the proposed exit strategy and agreed to provide the additional £1.5 million facility.
The interest was structured to be rolled up, allowing the client to repay the borrowing and accrued interest from the eventual sale proceeds rather than making regular interest payments during the term.
The case demonstrates how releasing equity from property can provide an alternative to refinancing an existing mortgage, particularly where a borrower wants to preserve favourable terms already in place. It also highlights the importance of considering specialist lenders when a high-value property and substantial equity are not reflected by conventional income-based lending criteria.
For borrowers seeking substantial finance against a high-value property, a large mortgage may also be considered, subject to the lender’s assessment of the borrower, property and proposed repayment strategy.
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.
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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.
