Steve asked me to help him sort out his mortgage. Although Steve works for a pensions and investments company he understands the complexity of the mortgage market and the value of using a good and experienced Mortgage Broker. We said to Steve we wanted him having your cake and eating it
Outline of the Case
Steve’s income is complicated and changes throughout the year. He wanted to buy a high value property and, unusually, required an ‘Interest Only Mortgage’ with a high loan to value. Steve and his wife Gail were also reaching the age where a long mortgage term would not be available from every lender, so this narrowed the range of options available.
Solid and experienced research brought us to the appropriate lender, and after checking all the criteria with the lender’s underwriters we received a positive result after applying for a Decision in Principle (DIP). Steve and his wife made an offer on the property which was accepted.
Then came a problem!
The vendors, however, wanted a quick sale. Steve and Gail had not yet sold their own house and were concerned it could take some time.
The first option we had was to look at was using a bridging loan to clear the existing mortgage. This would enable Simon and Gail to move into the new property and pay off the bridging loan when their existing house was sold. On calculating the costs attached to the bridging loan and considering the risk of having no exit in place, we explored the option of Let-to-Buy.
What is Let-to-Buy?
We spoke with Steve and Gail’s existing mortgage provider and confirmed that we could switch the outstanding loan into a Buy-to-Let mortgage (Let To Buy Mortgage North Devon – Aspire Financial Services (aspirefs.co.uk)). By doing so, we also increased the loan amount to a 75% value of the property, freeing up enough capital for the deposit on their new house. We also secured a competitive interest rate and Steve appointed a local rental agent to source tenants. The new rental income was higher than Steve and Gail had anticipated so not only covers the new mortgage payments but also generates additional income. This process of converting a residential mortgage into a Buy-to-Let, to raise capital for your next residential purchase is known as Let-to-Buy. There are many types of mortgages, for further information go to: Types of mortgage – Money Advice Service
The result – having your cake and eating it
The new purchase was now back on track. Steve and Gail could synchronise the moving out of their home with the tenants moving in, and still have the option of selling their original property later.
When we get to know our clients well and gain a full understanding of what matters to them, we can give a wide range of advice and be prepared to offer flexible options that may not have been considered otherwise.