Simon asked me to help him with his mortgage. Although Simon is a pensions and investments adviser, and might have a go at a DIY mortgage, he understands enough about the complexity of the mortgage market to know the value of using a good experienced broke.
Outline of the Case
Being bonus driven, Simon’s income is complex and fluctuates greatly over the year, He wanted to buy a high value property and, unusually, required an Interest Only Mortgage on a high loan to value. He and his wife were also reaching an age where an extended mortgage term would not fit every lender. This narrowed down the range of options.
Solid research brought us to the appropriate lender, and after checking all of the criteria with the underwriters we ran a successful DIP. Simon made an offer on the property and it was accepted.
The problem?
The vendors, however, wanted a quick sale, and Simon hadn’t sold his own house and was concerned that it could take some time.
One option we could look at was using a bridging loan to clear the existing mortgage; this would enable Simon to move into the new property and pay the bridging loan off when he sold his existing house. We weighed up the costs associated with bridging and also the risk of having no exit in place. As an alternative, we explored the option of Let to Buy.
What is Let to Buy?
We talked to Simon’s existing mortgage provider and confirmed that we could switch the outstanding loan into a Buy-to-Let mortgage. In doing so, we also increased the loan to value to 75%, freeing up enough capital for the deposit on Simon’s new house. We secured a competitive interest rate and Simon asked a local agent to source tenants. The new rental income was higher than Simon had anticipated so not only does the rental income cover the new mortgage payments but it generates additional income. This scenario, converting a residential mortgage into a Buy-to-Let, to raise capital for your next residential purchase is known as Let-to-Buy.
Summary
The purchase was now back on track. Simon could synchronise the moving out with the tenants moving in, and still has the option to sell his original property at a later date.
If you get to know your clients well, and gain a deep understanding of what matters to them, you can give a wide range of advice and be prepared to offer flexible options that may not have been considered otherwise.