complicated mortgage — News Content — Arc & Co | Specialist Debt Advisory | Marine & Aviation | Commercial & Development

Calculating how much a client could borrow to finance a property used to be very simple. Lenders would offer between 4 or 5 times their annual salary subject to the loan to value ratio. Today calculating how much someone can borrow is a little more complicated with many different criteria being used to determine affordability. At Arc & Co. our clients range from first time buyers through to high net worth individuals whose income is derived from multiple countries and in multiple forms. A recent client fell into the latter category who was wanting to finance a £14m property in near Hyde Park, a prime central London location whose past residents include Sir Winston Churchill and the Earl of Mansfield.

Daire Dowling, Managing Director of Arc & Co. Private Finance, explains why the deal was so complex; “The client wished to raise £4m on a £14m property near Hyde Park after taking tax advice from their accountant. The client didn’t have a traditional income stream, so we had to capitalise an investment portfolio in the background and put interest on account. The main motivation for the client was to cut down on remitted income into the UK from overseas and to generate clean capital within the UK jurisdiction for living expenses and succession planning. We were able to achieve all of this.”

Finance summary

Loan: £4m
Term: 5 year (interest only)
Rate: 1.75% margin on 3 month libor
Termination: No early repayment charge should the client decide to sell or pay down the loan for flexibility

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Clients often arrive at the door of Arc & Co. having been let down elsewhere first. This was the case for a recent client who was trying to purchase a 200 year old property in Edinburgh, Scotland in time for their children returning to university. With the clock ticking, Matthew Wheeler, a financial consultant at Arc & Co., took up the challenge of securing finance for the property and to leave another client more than impressed.

Matthew, gives an overview of the situation and why it presented a challenge. “The client came to us having been let down by a lender elsewhere so was understandably nervous about losing the property he had made a generous offer on. Also, things are always made more challenging when transacting in Scotland where mortgage offers have to be produced before an offer on a property can be accepted. This made for tight timescales and with a more vanilla case we would have focused on lenders that could move the quickest but instead focused on those who we knew would understand the complex financial situation of the client. Because the client was an ex-pat and paid in dollars, we had to work closely with the lender to make sure they were comfortable with his overall financial position and their long-term financial plans. The client was delighted with the rate the lender offered and security the fixed rate provided. We managed to have the conditional offer issued within 3 weeks of applying and the final offer shortly after in time for their children to move in before starting back at school and university.”

Summary

Client: Couple both UK ex pats resident in America for over 5 years. Buying a UK property for them and their children to use while they are attending UK schools and University.
Property: Purchase in Edinburgh of 200-year-old property, 5 bedrooms over 3 floors.
Value: Purchase price of £731,250 (£56,250 over value because of the market in Edinburgh being very competitive).
Vendor: – Private couple
Lender – HSBC 1.69% 3-year fixed rate
Loan amount - £506,250