Client Requiring Substantial Interest-only Mortgage

Our client was moving up the housing ladder, purchasing a bigger family home costing £3 million. She had managed to generate a £900,000 deposit from the sale of her previous property, requiring a mortgage for the remaining £2.1m.

Although this is a relatively big mortgage, despite the client’s large deposit, she wanted to keep her monthly payments as low as possible. She requested that as much of the borrowing as possible be on an interest-only basis.

Interest-only mortgages are harder to come by than they were before the financial crisis as many borrowers ended up with no means of repaying the interest-only portion of the borrowing. Numerous lenders were sourced before we could find a lender who would agree to a large proportion of the loan being on an interest-only basis. Even then, the lender wanted to see evidence of how the client planned to pay back the outstanding capital at the end of the mortgage term.

Key requirements: –

• A lender comfortable with a large portion of the mortgage being interest only. • A lender prepared to advance a large loan of £2.1 million. • A lender happy to add the arrangement fee to the loan.

After sourcing the mortgage market, we found a lender who would be happy to lend the majority of the mortgage on an interest-only basis.

The application process: To support the mortgage application, the client provided evidence of her income from working in the financial services sector in the City, which comprises a basic salary plus performance-related bonuses, as well as details of her outgoings. She also explained how she planned to eventually repay the interest-only portion of the loan by overpaying using her bonuses during the mortgage term. The client also provided proof of her identity. We were delighted to inform our client that the lender had issued a formal mortgage offer for the full amount requested

Property value: £3m Loan amount: £2.1m LTV: 70% Rate: 2.4% fixed for two years Lender product fee: £1,499 Monthly payment: £5,671

Note: This type of mortgage may not be suitable for your own circumstances. Please contact us for impartial mortgage advice.
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