While they were being sensible and planning for their retirement, lenders could not see how they could afford the mortgage repayments each month, as well as the pension contributions. Lenders were counting these against them when calculating what they could afford to borrow.
When the clients approached us for help, we needed a lender who would take into account that a significant proportion of their pension contributions were voluntary so should not impact the affordability of their mortgage. Our clients also needed a cheap mortgage rate to ensure the mortgage was affordable.
Key requirements: –
• A lender who would lend the full £1.05m required to purchase the new property. • A lender who would understand that a large proportion of the clients’ pension contributions were voluntary and therefore did not impact the affordability of the mortgage. • A lender offering a competitive rate, who would agree to add the fee to the loan.
After sourcing the market, we identified a lender who would agree to exclude the voluntary element of the pension payments from the affordability calculations. It agreed to lend the full amount requested at the most competitive rate on the market at the time – 1.04 per cent fixed for five years. This will save the clients £6,000 over the initial five years compared with the best mortgage the clients found after doing their own research.
The application process: To support the loan application, the clients provided evidence of their income, pension contributions and identity. We were delighted to inform them that a lender had issued a formal loan offer for the full amount requested at a competitive rate.
• Residential property value: £1.5m
• Loan amount: £1,050,000
• LTV: 70%
• Rate: 1.04% fixed for five years
• Lender product fee: £999 added to the loan
• Monthly payment: £3,874