- Client: UK-based couple
- Property Portfolio: Two residential properties valued at approximately £800,000 and £600,000
- Facility: Circa £400,000 interest-only remortgage
- Purpose: Debt consolidation, tax liability and home improvements
Enness was approached by a UK-based couple who were looking to simplify their financial commitments following a significant change in their circumstances. One partner had recently retired from business, while the other remained in employment within the legal sector.
The couple owned two residential properties in the UK, valued at approximately £800,000 and £600,000 respectively, with existing mortgages secured against both. They also had unsecured debts and an outstanding tax liability that needed to be addressed, alongside a requirement for funds to carry out essential improvements to their home.
Rather than arranging separate finance for each requirement, Enness reviewed the couple’s overall position and explored whether the equity held across their properties could be used to create a more straightforward structure.
We identified a lender willing to provide a circa £400,000 interest-only remortgage against one of the properties. The facility was structured to consolidate the existing mortgages on both properties, repay the unsecured debts and outstanding tax liability, and provide additional funds for the required home improvements.
The lender’s standard criteria did not ordinarily permit capital raising for the repayment of a tax liability. However, Enness was able to present the circumstances to a lender with which it had an established relationship and secure an exception to the usual policy.
The interest-only structure also provided flexibility around the eventual repayment of the borrowing. The lender was comfortable with the repayment strategy being linked to the potential future sale of either property, subject to the agreed terms.
The new facility was secured on a competitive two-year fixed rate, with assisted legal costs helping to reduce the upfront expense of arranging the refinance. Consolidating the different liabilities into a single facility also reduced the number of separate financial commitments the couple needed to manage.
This case demonstrates how UK mortgage solutions can be structured around a client's wider financial circumstances rather than simply the property being refinanced. For homeowners with multiple properties, existing borrowing and additional financial commitments, a carefully structured remortgage may provide an opportunity to consolidate borrowing and release equity, subject to lender criteria and affordability.
An interest-only mortgage can also provide a different repayment structure from a conventional capital-and-interest mortgage. However, borrowers must have a suitable repayment strategy in place and should consider the implications of the outstanding balance remaining due at the end of the term.
If you are considering refinancing a property to consolidate existing borrowing or release equity, speak to a mortgage specialist to discuss your requirements.
Disclaimer:
This case study is for illustrative purposes only and does not constitute financial, legal, tax or investment advice. Finance is subject to status, affordability, valuation, underwriting and lender criteria. Interest-only borrowing requires an appropriate repayment strategy, and the full capital balance remains outstanding during the interest-only period. Property values can fall as well as rise, and failure to meet repayment obligations could put the property used as security at risk.
Information contained in our case studies is for market and illustrative purposes only. In some cases, these may be made up of multiple cases and are for illustrative purposes only.
Some case studies are made up of enquiries that have come into the business, not all business completes, and the posting of a case study does not represent a completed piece of business.
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.
