Self-Employed – unusual situations

Sometimes a new mortgage is not easy to arrange for the self-employed. For very good reasons of their own, suitable income for mortgage lending purposes can be difficult to evidence. This is just one example of how the professional mortgage lending industry works together to provide the right solution. This example is kindly provided by another firm of mortgage brokers, but demonstrates that if high street lenders are reluctant to help that quite often the solution can be found elsewhere.

Profile
The clients were looking to re-mortgage their main residence. However, the fact that they were self-employed and that their income structure was complex, made arranging a re-mortgage a challenge.

The clients wished to borrow £250,000 against a property valued at £600,000. They wanted to replace their previous high street mortgage, with a new mortgage on an interest only basis.

The clients are in their 60s, self-employed and are paid in the form of a director’s loan. This is income which an individual receives from their company. It is not a salary, but money which they have previously paid into or loaned to the company. This created a challenge, as lenders generally do not accept this form of income. As a result the clients could not meet most lenders affordability criteria.

Solution
The clients approached us to assist them in sourcing a mortgage that suited their needs. We took the time to fully review their circumstances, and using our experience and expertise in dealing with complex cases we were able to find them a solution.

When approaching the lender, we presented the clients unused pension pot as a repayment vehicle for the mortgage, as an alternative to the director’s loans repayments. Between the clients they had a total pension exceeding £1 million, and would receive a guaranteed amount of £74,000 a year between them, for the rest of their lives.

We provided the lender with copies of the pension payments. This was enough proof for the lender that the clients had the funds available if they were needed, although they did not require it to be drawn. The lender could, therefore, base affordability on the unused pensions rather than the self-employed director’s loan. This suited the clients perfectly.

The clients were happy with the mortgage terms presented, and were able to secure funding to re-mortgage their home.

Deal Highlights

Loan amount:£250,000
Rate:3.45%
LTV:41%
APR:Overall cost for comparison 4.6% APR representative variable
Term:10 years
Type:Interest Only
Loan purpose:Re-mortgage
Lender’s arrangement fee:0.75% of the loan amount
Early repayment charges:3% of the remaining balance during the first 2 years

Notes
This case study is for information and illustration purposes only. It is not an offer, or suggestion of an offer. Each mortgage case is assessed on an individual basis and there is no guarantee that the solution described here can be repeated in the future.

Please note that this specific deal may not be available to – or suitable for – all customers, dependent on their individual circumstances. The rate quoted may become out of date at short notice and may not be available at the point at which customers enquire about it. This document may not contain all the information needed for customers to make a decision and they should seek advice.

Overall cost for comparison 4.6%APR representative variable based on 10 years at 3.45%. Lender’s arrangement fees of 0.75% of the loan amount. The actual rate available will depend on your circumstances.


Your home or property may be repossessed if you do not keep up the repayments on your mortgage or other loans secured against it.

Peter Marriott | Mortgage Consultant

Peter is delighted to have spent his career helping make the dream of home ownership a reality for his clients and is always happy to help those looking make their dreams come true.

E-mail: peter@westexe-mortgages.co.uk
Tel: 01392 216 344

Posted on July 19, 2017 by Peter Marriott, in: Industry posts

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