Area: London
Amount raised: £1.53 million
Listen to this case study here
If you run your own limited company and are looking to get a mortgage, you may have encountered several issues. The market for self-employed mortgages varies considerably, and it is often where banks will tighten up during tough times. If you were a self-employed borrower during the COVID period, a considerable number of lenders had removed new lending for self-employed applicants entirely. When they returned to the market, they often had very tight criteria or required a high deposit.
The scenario
We were contacted by a client who owned a well-known production company and they were looking to purchase a new residential property in London with their partner, who was a foreign national and residing on a VISA. The client was looking to obtain a loan of 85%, ensuring their deposit requirement was kept as low as possible.
They were the majority shareholder of a limited company and they had only taken a small salary and dividends for the last few years. The company had also heavily invested two years ago. So their net profits were extremely high in the most recent year, but significantly lower two years ago and high again three years prior.
Because the client had only taken a small salary and dividends from the company, we could not use a lender who only based affordability on drawn income. We were also unable to use a lender who used a two-year average to calculate affordability, because the heavy investment in marketing was significantly depressing their average level of income.
The solution
We were able to use our knowledge of high street lenders’ underwriting criteria to have a three-year average of the client’s net profit accepted for affordability. This meant they were not penalised for investing in their company and they were still able to proceed with their new residential purchase
The bank was able to lend a maximum of 85% based on the value of the property, but they were able to accommodate a foreign national at this level without any difficulty. Unlike a private lender, we were able to arrange a 40-year repayment term for the loan. This provided the client with the lowest monthly payments, while also allowing them to make overpayments to repay the loan quicker.
If you are self-employed and are interested in learning more about your mortgage options, contact Orton Financial today.