Find out how we successfully navigated complex income sources and lender criteria for our clients seeking an interest-only mortgage for a new home purchase.
At a glance:
- A new home purchase on an interest-only product
- A five-bedroom semi-detached property in Berkshire
- Complex income from pension and rental property
The Case:
Our clients desperately wanted to purchase a stunning five-bedroom semi-detached property as their new home, and move their mortgage onto an interest-only basis.
With the mortgage application in both clients’ names, there were a few different income streams to consider. While one was still working, the other had retired, taking a pension income from a SIPP. They also received income from an unencumbered buy to let.
Lenders have strict criteria for income requirements for interest-only mortgages, which made placing this case a challenge. Furthermore, many lenders have upper-age limits for when the mortgage must be repaid or applied for, further limiting the lenders we could approach for this deal.
The Challenge:
As mentioned, many lenders have high minimum income requirements for interest-only applicants and accept certain income types. For example, many will not consider bonuses, rental income, and pension income (despite being a guaranteed income type) when reviewing affordability requirements. Consequently, our client failed to meet many lenders’ minimum income requirements.
However, with our experience working with lenders in the complex homebuyer space, we quickly identified which lender may have more flexible criteria to support our client. The Highstreet bank lender had no minimum income requirement, so our client was allowed to borrow the full loan amount required. The lender required that the mortgage be repaid before the borrower’s 70th birthday, meaning we could secure a competitive 5-year fixed. Our clients were delighted to proceed.
The Finance:
Property value: £795000
Loan amount: £200,000
LTV: 25%
Rate: 4.05% 5-year fixed*
Term: 5-years, interest-only
Monthly mortgage payment: £683.40
Lender arrangement fee: £999
*Rate as at August 2024
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