| Loan amount | £750,000 |
| Purchase price | £1,050,000 |
| Loan-to-value | 71% |
| Property type | Georgian family home |
| Location | Bath (BA2) |
| Borrower | Limited company director |
| Term | 25 years interest-only |
| Rate | 5-year fixed |
| Lender type | Specialist HNW lender |
The Story
We were approached by a client who runs a successful recruitment company.
He wished to purchase a large property for his family in Bath, and we were happy to help.
With an offer accepted on a beautiful four-bed home that boasted far-reaching panoramic views of the Mendip Hills, we knew we had to act quickly to ensure completion of the purchase.
The client had agreed a price of £1,050,000 and was looking for £750,000 on an interest-only basis.
The team at Fox Davidson got to work.
The Challenge
The client ran his company very efficiently and retained the profits rather than draw them as dividends.
Due to this, he needed a lender who would recognise this income.
The client also wanted the mortgage on an interest-only basis using sale of the property as the repayment strategy.
He had spoken to his existing lender directly – he then came to us as he wanted Fox Davidson to explore the option of proceeding with them.
The Solution
Upon further investigation, it actually made sense for our client to go with a different bank.
The other lender we found was prepared to offer him more money on a lower interest rate, therefore saving our client money.
By utilising a lender that treated the client’s income in a way that shows a true understanding of how net profits work, we were able to help the client buy their dream home.
Frequently asked questions
What is an interest-only mortgage?
An interest-only mortgage requires only interest payments during the term, with the capital repaid at the end through a credible repayment vehicle. Common vehicles include sale of the property, sale of investment assets, planned bonus or RSU income, and downsizing in retirement.
Who qualifies for an interest-only mortgage?
Most lenders require a minimum income of £75,000 for interest-only lending. Higher loan amounts (£500,000+) typically require £100,000 to £200,000 minimum income, plus evidence of a sustainable repayment vehicle.
How is the repayment vehicle assessed?
Lenders verify the credibility of the repayment vehicle as part of the application. Acceptable evidence includes an investment portfolio with track record of growth, a credible downsizing plan with current property valuation, or RSU vesting schedules with broker statements.
What rates apply to interest-only mortgages?
Interest-only rates typically match capital repayment rates at the same LTV. The cost saving is in the monthly payment, not the rate. Some specialist HNW interest-only products price 10 to 30 basis points cheaper than equivalent capital repayment options reflecting borrower profile strength.
Completed transaction. This case study describes a live deal arranged by Fox Davidson. Client details are anonymised and figures rounded.
All rates and terms are indicative and subject to individual assessment, lender criteria and property valuation. Your home may be repossessed if you do not keep up repayments on a mortgage.
Large interest-only mortgages from £500,000. Fox Davidson are residential mortgage specialists for high earners and HNW clients.