Large Re-Mortgage completed using a variable income structure during Covid 19

typical knightsbridge home

The client: Our client wanted to remortgage his home to obtain another competitive rate and avoid moving onto the lender’s higher standard variable rate (SVR). He is an investment banker with a basic income, plus variable bonuses.

The property: Located in London, the property is a four-bed mid-terrace house valued at £2m. The client bought it in 2018 for £1.85m with a two-year fixed-rate mortgage costing him £5,392 per month.

The finance: The client’s existing mortgage was about to revert onto his lender’s SVR, pushing up his monthly payments to £6,684, a not-insubstantial £1,292 monthly increase.

He asked his lender for a product transfer but the terms offered were not particularly attractive. So he asked us to help find him a better deal.

Key requirements:

  • A repayment mortgage with monthly payments as low as possible. We needed a lender which would take variable bonus payments into account and offer a maximum term of 30 years, taking our client to his 70th birthday.
  • A lender that turns around applications quickly.
  • The ability to add the lender’s arrangement fee to the loan.
  • A lender who would provide high loan-to-value borrowing on a £2m property.

We are aware of lenders who take a flexible approach to bonus payments on loan sizes above £1m and with the ability to add fees to the mortgage. After researching the whole mortgage market, we identified a competitive product allowing the client to borrow the full £1.5m required on a repayment basis, taking into account his variable income. This would reduce the client’s monthly payment by £383 from his current payment and means he doesn’t have to revert onto his existing lender’s much higher SVR. As an added bonus, the new lender offers free valuation and legal fees, making a further saving.

These features and benefits really appealed to our client. We submitted a ‘decision in principle’ and got approval from the lender before submitting the full application.

The application process: To support the mortgage application, the client supplied us with proof of identity, address and confirmation of bonus payments for the past three years. We dealt with an underwriter who works with high-net-worth (HNW) clients and the application was approved. The same underwriter dealt with the case from day one, with a formal mortgage offer issued two weeks later. We were delighted to inform our client that the lender had issued a formal offer for the full amount.

We arranged the completion of the remortgage to coincide with the end of the client’s existing fixed rate, ensuring no early repayment charges (ERCs) were due and there was no danger of the client moving onto the higher SVR.

Property value: £2m
Loan amount: £1.5m
LTV: 75%
Rate: 1.26% 2-year fix
Term: 30 years
Lender facility fee: £995 added to the loan
New monthly payment: £5,009
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