This was an issue Steve Straker, managing director of mortgage services at independent financial advisory firm Cartlidge Morland, had to address when he was approached by a client wanting to buy a second property in central London.
Steve’s client was a professional investor and extremely wealthy. He already owned a large family residence in the country and a pied-à-terre in the capital and wanted to buy a second London residence, with a view to eventually using it as his main family home. His plan was to rent out his existing pied-à-terre while retaining his country home for weekend use.
Although Steve’s client generated a substantial income and had a significant investment portfolio, he didn’t want to liquidate his assets in order to fund the purchase of additional property. Steve’s brief was to find a way to use the existing properties as security for a mortgage for the new house in London.
Steve explains the challenge: “This deal was complicated for a lender, both in terms of understanding my client’s income and investments and the desire to have security for a loan split over several properties.”
Alex Ell of Investec who helped complete the deal, says: “This deal perfectly illustrates the issues that many high-net-worth borrowers face. The amount they earn, both in terms of salary and bonuses, can be high but it’s not unusual to find that their money is invested all over the world and is not always readily accessible. Millionaires therefore need mortgages just as much as the rest of us do.”
He adds: “Although the total amount being borrowed was several million pounds, it only represented approximately 1.5 times the borrower’s income. The two London properties offered good quality security and we were therefore happy to construct a bespoke package for the borrower, based on one property being funded with a buy-to-let mortgage and one with a residential loan.
“The applicant also wanted to exchange and complete very quickly and we were able to instruct a valuer and get our own legal team on the case immediately. The deal was approved by credit committee without any issues and we structured the deal so that the borrower could use his substantial bonus payments to pay-down the outstanding capital and benefit from a reducing rate as the capital balance reduced.”