The following is a real life case study that took place in March 2012 to show that there are still lenders that will consider some outside of the box thinking when applying mortgage underwriting.
What did the client want to achieve?
An existing client approached us to look at porting his existing Woolwich residential mortgage of £330,000 to a new property valued at £550k. The client only required a new mortgage of £300k on the new property due to downsizing. The reason behind the porting of the existing mortgage was two fold:
- The existing deal was still in a fixed rate period and therefore still had redemption penalties if the client were to redeem the mortgage and move to another lender
- The fixed rate that we secured the client 24 months ago was and still is very competitive and attractive in the current market.
What were the issues?
In the last two years the client’s self employed income had reduced slightly and this was evident in the self assessment forms that were available Based on the figures available the maximum loan available was only £278k which meant a shortfall of £22,000. Based on the lenders published criteria the income that the wife earns was not acceptable as she had recently joined the husbands business as a partner 11 months ago so no self employed income was available for verification and if it was the lender requires two years of self employed income to meet their criteria.
How was a Loan of £300,000 ‘approved in principle’?
The adviser at The Mortgage Broker (St Neots) looked a little deeper into the mortgage enquiry and found that the wife had previously been employed by her husband’s business in the 6 years prior to going into partnership with him. Although her income wasn’t great It was kept below the threshold for paying income tax, the figure was sufficient in the adviser’s eyes to warrant an increase in the loan amount from £278k to £300k. The adviser discussed the case with an Underwriter at Woolwich and presenting a business case for approval which included the following facts:
- The initial loan amount was decreasing from £330k to £300k and therefore a better risk to the lender
- The wife could prove an income over the past 6 years from the same business and the only reason no proof of income was currently available was down to a change in tax structure after taking advice from their accountant
- A clean credit history and perfect track record with the lender.
Based on the above information and after providing some additional soft facts the lender approved the mortgage for £300k and only required sight of the business bank accounts from the previous 3 months as additional information to approve the higher loan amount.
‘Outside of the box’ mortgage lending and underwriting is available with a strong business case and the correct lender. Not all lenders will look to lend over and above the figure that their electronic systems provide. For this reason, if you have a quirky mortgage or a mortgage that requires a lender to look at the ‘bigger picture’ it is often worthwhile letting a broker look at your mortgage enquiry as any decent broker should have an understanding of which mortgage lender may consider talking your case on.