Pied-A-Terre Mortgage for Barrister Moving From Bristol to Yorkshire.
THE BRIEF: OBJECTIVES/PROBLEMS/CHALLENGES:
A Barrister working out of a Bristol chambers approached Fox Davidson due to our expertise working with professionals. We were asked to finance a second main residence in Bristol before the existing home was sold and the client relocated to Yorkshire. We would need a lender willing to lend on a second main residence in the same City which is usually an issue for lenders as an application for a pied-a-terre mortgage usually has to be in a separate City.
The lending requirement was for an interest only pied-a-terre mortgage using the sale of the subject property and/or the existing main residence which was on the market in anticipation of the move to Yorkshire.
The key to financing a pied-a-terre mortgage (second home mortgage) is plausibility and affordability. We need to demonstrate to the lender why a second home is required and show that the client has the affordability to pay both mortgages and both sets of council tax and utility bills. Lenders will assess affordability using the existing mortgage and bills as a monthly outgoing.
We are a whole of market broker and having access to the whole of the market coupled with a good working knowledge of securing a pied-a-terre mortgage meant we knew which lenders to approach from the moment we finished our first meeting with the client.
The interest only method of repayment using the sale of property was also acceptable to most lenders all be it with certain criteria that has to be met.
Interest only lending using the sale of a subject property is usually subject to lower loan to values usually around 50%. In addition there needs to be sufficient equity in the property and clients are usually required to have a certain amount of income.
Following the initial meeting with the client we made several calls to our contacts at the various lenders. Lending was agreed with 3 lenders and we then presented the best fixed and variable rate options to our client.
A loan of £400,000 was agreed at a fixed rate of 1.3% for 2 years. The loan was agreed on an interest only basis.
IN OUR OWN WORDS:
Many lenders in the UK have stringent rules on pied-a-terre mortgages and state that the second home should be in a location away form the current main residence. As this was not the case at application we knew a few lenders that would not be able to get over that fact and avoided those lenders. To secure a very competitive rate at sub 2% and on an interest only basis ticked all of the boxes for our client and has allowed them to secure their base in Bristol whilst continuing with the purchase of their new main residence in Yorkshire.
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Fox Davidson are property finance experts. If you need to finance property or land we have the contacts and the expertise to provide you with market leading solutions.