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Contractor Purchase – Case study

The Client:

The client had worked on multiple contracts, which causes complications on the underwriting side and narrows the number of lenders to approach.  They were looking to purchase a residential property and had good credit.

The Scenario:

There are lenders who will say that they will accept multiple contracts however when the underwriter’s review, they will not feel comfortable for the client to work 50-60 hours a week” even if the position is not physical at all. These lenders have double standards and discriminate against contractor applicants. They would take the overtime income of employed applicants working a 48 hour contract and doing an extra 12 hours overtime – these have been clear practice especially in the healthcare sector.

At this point we would go to lenders who use a bit of common sense and can take up to 3 sources of income – the contractor day rate multiples are on the more conservative side (day rate x 5 x 41 opposed to the 46 multiple) however the income multiples will still be favouring the clients.

Our client’s original application took a halt after the lender exceeding the widely advertised 10 working days SLA and reached a halt 8 weeks in the underwriting the lender saying they will only use the main contract due to not seeing how it would be feasible to work 40 hours on a main contract and being 20 hours on retainer.

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The Solution:

With great disappointment after hours of manpower poured in the application we had looked elsewhere – we approached a lender who were happy to take both contracts into account and said they would consider up to 3 if need be.

Summary:

Contractor applications can be complex. And not all lenders can consider them favourably. The current view of contractors is divided. Most of the high street lenders would consider them as self-employed unless they fall under IR35. Some will use the day rate if the income is over £75,000, then we have the lenders who will use a multiple of the day rate.

With our contracting clients it is important we find the best way to increase their affordability, and, in most cases, this would be using a multiple of the day rate.

If you’re a Contractor with Mortgage questions or would like some free advice, contact us today to speak directly with one of our CeMAP certified Mortgage Advisors. Call us today on 03330 169 646. Alternatively, please complete this short online form and one of our Advisors will call you right back.

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First Time Landlord purchase with Gifted Equity from family member – Case Study

The Client:

The client is a homeowner. She and her son share this property and he pays the mortgage, but her name is equal part to it. She works part time and is on a modest income of £11,000 annually. She also has debt that far exceeds her income, she has 2 loans that total quite a bit over double the income. One of these loans is also paid by her son but is solely in her name. Despite the amount of credit, she has no adverse and a good score.

The Scenario:

The client was looking to purchase a Buy to Let property from her sister. She needs a lender that will accept her despite low income, and high debt. I had to make the client aware of the fact that despite the residential mortgage and one of the loans being paid for by the son, it remains her commitment. If the son stopped paying the mortgage and loan, she would remain liable for the payments, so they must be taken into account as her debt. The client also has no physical deposit. As she is buying the property in an inter family sale, her sister is willing to gift the equity as the full deposit, so we need a lender that is happy with those things.

The Solution:

Being a whole-of-market Mortgage Broker, we have the knowledge to know that some lenders will have a kinder approach to debt to income percentages. We had to make sure we could find a lender that had no specific criteria on this, and as long as the client could fit their requirements for adverse, it would pass their internal score and decision in principle. We also needed a lender that was ok with the client being a first time landlord, with no minimum income requirements, of which there are plenty to choose from. As we deal with so many weird and wonderful scenarios, we are well versed as a company at finding solutions, and we found a High Street lender that was happy with an inter family purchase with the vendor gifting the entire deposit via equity, this is something not all enders are happy with.

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Summary:

When purchasing a Buy to Let property, income amount isn’t overly important unless you have a much higher debt to income ratio. Options become limited when this is the case. You also need to realise that it becomes limited when buying from a family member and have no physical deposit with the equity being gifted as the deposit.

Key things to consider for a first time landlord purchase from family member with equity gifted as deposit:

  • Debt to income ratio
  • When you share debt, but the other person pays, it is still your debt
  • Inter family sale with equity gifted as deposit

Contact us today to speak with one of our CeMAP certified Mortgage Advisors regarding your Buy to Let Mortgage enquiries. Call us today on 03330 169 646. Alternatively, please complete this short online form and one of our Advisors will call you right back.

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Mortgage Porting with Additional Borrowing – Case Study

The Client:

The clients were a young couple with a child who owned their residential home.  The first applicant was in fulltime employment, and the second applicant was employed part time – taking care of the children.  They had recently remortgaged their property onto a five-year fixed rate deal. 

Scenario:

A property became available as part of the partners fathers deceased estate, there was an Equity loan attached to it along with other charges.

There were 2 parties to the inheritance.

To prevent any early repayment charge with their existing mortgage lender the transfer of the current mortgage and topping up the loan with more borrowing was deemed to be the most cost-effective solution also using the inheritance part of the loan as a discount toward the purchase price.

Contact us today to discuss Contractor Mortgages and how we can assist you.

The Solution:

The lender had some unusual and limiting criteria regarding the use of equity, so we had to structure the loan in such a way as to meet the client’s needs, the lenders criteria and also ensure that the other beneficiary of the estate received their inheritance.

We were able to raise the additional funds needed to ensure the extensive renovation works could commence immediately on grant of planning for the extension works.

With the additional borrowing and the transfer of the current loan, their payments were well withing budget despite the new property being considerably larger and with room and land for their family to grow.

Had we tried the remortgage or development finance options for the costs and penalties would have been prohibitive and not allow them to buy this property which will once complete be the home they live in for many years.

Contact us today to speak with one of our CeMAP certified Mortgage Advisors on 03330 169 646. Alternatively, please complete this short online form and one of our Advisors will call you right back.

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Second Charge Mortgage – Case Study

The Client:

The clients were a married couple who owned their residential home.  The husband was self-employed, and wife employed part time – taking care of the children.  Money was tight and keeping up to date with costs of running the home and meeting the repayments to their creditors was becoming more and more stressful for them. 

Scenario:

The client accumulated quite a lot of unsecured credit over time along with a large HMRC Tax Bill. 

Their disposable income was in a negative situation and they were unable to remortgage due to a high early repayment charge.

To prevent any early repayment charge with their existing mortgage lender, and to help with the consolidation of unsecured credit and the settlement of the HMRC Tax Bill, a second mortgage was recommended.

Discover our Second Charge Mortgage services.

The Solution:

A Second mortgage was raised for the client.  This in turn protected their existing mortgage rate and meant not having to pay the early repayment charge with the existing mortgage lender. 

We were able to raise £100,000 for the client. The second mortgage lender was happy to consolidate the unsecured credit which was over £60,000 and happy to settle the HMRC Tax bill – the client had to confirm what provisions they had in place to prevent HMRC Tax owed in the future. 

The second mortgage reduced their monthly outgoings from £1,400 per month to a more comfortable repayment of £500 per month.  The client was no longer in a negative disposable income situation.  They were now in a much more positive position which gave them better quality of life and funds left over for any life events.  The pressure and stress they were experiencing was removed.  They only had their mortgage payment and second mortgage payment to focus on which also made everything more manageable for them. 

By settling all the unsecured credit this also helps the client to be in a better position for remortgage options in the future when their fixed rate ends.

If you have any questions about how Second Charge Mortgages work and if they might be a good solution for your own personal needs then please get in touch with us today to speak with one of our CeMAP certified Mortgage Advisors. Call us today on 03330 169 646. Alternatively, please complete this short online form and one of our Advisors will call you right back.

Mark Phillips No Comments

Residential Remortgage – Case Study

The Client

The clients had a large portfolio of properties within their local area who were wanting to raise funds for ongoing property purchases and building projects that they had lined up. Both applicants were mainly self-employed, with one applicant having income from employment.

The Scenario:

Due to ongoing investment plans, they needed to raise funds from their existing properties. The issue was, most of their properties had a mortgage which were on fixed rates, meaning that if they were to raise funds via remortgaging, they would have Early Repayment Charges (ERCs) to pay. The client’s current residential property however was unencumbered (no mortgage) therefore this was going to be the most cost-effective route for raising the required funds.  

Contact us today to discuss Contractor Mortgages and how we can assist you.

The Solution:

After gathering the clients’ self-employed tax documents covering the past 3 Years, we were able to carry out a detailed Affordability Assessment to see how much they would be able to borrow. Initial affordability calculations showed good client affordability, however a lot of lenders also take into account the Buy to Let Mortgages in the background and run an affordability assessment on those as well. Although the mortgages were covered by the monthly rental income, the way Lenders assess this can often reduce the amount they are willing to lend on the residential mortgage. Additionally, some Lenders do not lend to applicants who have above a certain number of investment properties.

After sourcing a Lender who could provide the clients with the required funds on a competitively low interest rate, the application was submitted and proceeded to offer within just two weeks. The funds have subsequently been released and in turn we have assisted the client with obtaining an additional mortgage for the purchase of another Buy to Let property.

Summary:

When trying to raise funds against your residential property, every Lender has different criteria on which those funds can be used, as well as different assessment on affordability of background income. Therefore, it is crucial to ensure you speak with an experienced Mortgage Broker who understands the Lenders’ criteria to save you time and money when trying to secure a residential remortgage. 

Please get in touch today with our dedicated team of Specialist Mortgage Advisers for any Residential Remortgage or Mortgage questions you might have. Call us now on 03330 169 646. Alternatively, you can also fill in this short online form and we will get back to you straight away.

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Buy to Let Remortgage – Case Study

The Client:

The clients had previously switched their former residential property onto a Let to Buy Mortgage to allow them to raise funds for a deposit on a new purchase. The fixed rate was due for renewal and therefore they needed to look at securing a new mortgage. Both applicants were full time employed with a clean credit history.

The Scenario:

Currently, due to slow service levels from lenders and increasing mortgage interest rates, the client wanted to lock in a rate a few months in advance to ensure the lowest rate possible. They were not looking to capital raise therefore we could explore both product transfer options as well as a full remortgage to a new lender. They informed us that a 5 Year fixed on interest only would be preferred due to the current economic uncertainty.   

Contact us today to discuss Contractor Mortgages and how we can assist you.

The Solution:

Upon reviewing the options with their current lender, it was apparent that it could prove beneficial to assess the whole market to see if a new lender could provide a cheaper loan. A full assessment of the mortgage market was undertaken and it became apparent that a full Remortgage to a new lender, who were offering a free valuation and free legal service would save the clients over £1,500 across the 5 Years, compared with the Product Transfer options which existed with their current lender. The application was submitted and the Mortgage Offer was issued within 14 working days.

Summary:

When looking to obtain a new fixed rate it may often seem easier to carry out a Product Transfer with your existing lender, however as this example proves, it is certainly always worth speaking with an experienced Mortgage Broker who can offer a hands-on approach to your Buy to Let Remortgage to compare your options and see if money can be saved by remortgaging elsewhere. 

To find out more and discuss your remortgage options with one of our highly experienced and CeMAP Qualified Mortgage Advisors, call us now on 03330 169 646. You can also fill in this short online form to get started. Our team of Residential & Buy to Let Mortgage Advisors will get back to you straight away.

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First Time Buyer – Self-employed Partner with No Accounts

The Client:

We were recently successful in helping a client buy their first home, who had recently become a Partner within a GP practice.

The Scenario:

Typically, when you become a Partner of a GP practice you a treated as “self-employed”. A Partner will take a share in the profits (and losses) of the practice. Compared to a salaried (employed) GP who is employed on a contract, on a basic salary by the practice.

Contact us today to discuss Contractor Mortgages and how we can assist you.

This can pose an issue when looking to take out a mortgage as typically lenders will need at least 2 years history in that role, being self-employed. To a Lender anything less can be deemed risky. Due to the nature of being self-employed, income will typically fluctuate. As a result, Lenders risk appetite is high as they need to be sure that the business can prove a sustainable track record of earnings by way of 2 years accounts.

Therefore, on the face of it our client wouldn’t be able to get a mortgage having only just joined the practice and not having the standard track record lenders demand.

The Solution:

However, this wasn’t the case for our client. This is where our expertise came into play, being a Specialist Self-Employed Mortgage Broker we were able to source a market leading deal with a well-known High Street Lender.

All the Lender required instead of the typical 2 years accounts, was a letter from either the head partner OR Practice Accountant detailing the level of projected drawings the client was expected to receive for the year. In addition they also required to see the detailed Practice Accounts to back up the letter.

To make things even better, we were able to obtain a ratio of 5.5 x income and also up to 90% loan to value, which represented an excellent deal for the client who was delighted with this outcome.

Summary:

Being self-employed for less than 2 years doesn’t necessarily mean that you are unable to get a mortgage. Working with a Specialist Mortgage Broker that fully understands the market and what options are available to self-employed persons such as Partners, GPs & Contractors etc; is the best way of not only ensuring you can successfully secure a mortgage, but equally that you can achieve the highest loan to value and income multiples.

To know more and speak to one of our Contractor Mortgage Expertscall us now on 03330 169 646. You can also fill in this short online form to get started. Our team of Contractor Mortgage Experts will get back to you straight away.