We were approached by an existing client who was looking to refinance her residential mortgage. Interest rates had risen considerably since she took out her initial fixed rate so she wanted to explore converting the facility to interest only for a temporary period of time until rates had settled.
However, she was having issues due to declining profit within her business.
We were able to arrange a remortgage facility within the retail division of a well-known commercial bank. The lender was happy to offer the majority of lending on an interest only basis thus reducing the monthly payments for the applicant.
The bank was happy to overlook the pattern of declining profit due to strong recent turnover backed up by business bank statements and a ledger of bookings which further highlighted that her business was beginning to pick up after a period of decline.
Our primary issue was the declining profit which had occurred for the last two years in a row and was evident in the accounts. These cases can be tricky to place as the lender naturally wants to see that the business is stable especially if the applicant is attempting to borrow the maximum available amount relative to their income.
Key to securing terms was our whole-of-the-market access as this allowed us to source the correct lender for the client who would be able to consider the application as long as we presented the case in the correct manner.
Additionally, we needed a lender that would consider the applicant’s profit before tax + director’s salary which was a challenge in itself as most lenders consider either profit after tax or declared dividends with regards to affordability.
We were able to reach out to the development manager at the retail division of a prolific commercial lender and submit a business case. We highlighted the recent increase in turnover of the business and provided a booking ledger showing the number of bookings made for the coming months.
The lender was clearly able to see that current monthly turnover when annualised stacked up with the declared profit of the business for the last tax year. On this basis, the application was approved and a valuation promptly carried out.
We secured a part & part facility with 50% of the property value on interest only. The result was a monthly payment that was roughly the same as the applicant’s previous payment. We will review in 18 months and aim to convert back to capital & repayment once interest rates have settled.
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