Case Study –Structuring an 85% LTV Mortgage Following a Business Sale and Historic Adverse Credit

The Situation

A client approached Henry Dannell following the sale of their business and subsequent employment by the acquiring company.

The client had moved onto a basic annual salary of £361,615 and was looking to purchase a residential property for approximately £2 million, requiring borrowing of up to 85% loan-to-value.

The structure of the mortgage was an important consideration. Rather than placing the entire borrowing on a capital repayment basis, we explored a part-and-part structure with a significant interest-only element to help manage the client’s contractual monthly commitments.

The Challenge

The case involved several factors that required careful lender selection and structuring. Our initial research identified a lender that could potentially support the required borrowing, with up to 75% of the property's value structured on an interest-only basis. However, the application was subsequently declined due to historic adverse credit arising during the client's separation. We therefore needed to reassess the market and identify an alternative lender able to consider the historic credit position while supporting borrowing at up to 85% LTV and accommodating a significant interest-only element. Identifying a lender prepared to consider the circumstances was only part of the challenge. The mortgage still needed to provide the level of borrowing required while remaining aligned with the client's preferred monthly commitment and anticipated future financial position.

The Solution

Following the initial decline, we reassessed the available market and identified an alternative lender whose criteria could accommodate the client's circumstances and proposed structure. An Agreement in Principle was secured for borrowing at up to 85% LTV, with up to 75% of the property's value structured on an interest-only basis. A two-year fixed rate was selected, providing certainty over the mortgage rate during the initial period while allowing the client's position to be reviewed again as their financial circumstances developed. This was particularly relevant given the client's expectation of receiving further proceeds from the business sale. Their intention was to use these funds to reduce the outstanding mortgage balance, which could lower the LTV and potentially broaden the options available when the initial fixed-rate period came to an end. The result was a mortgage structure that enabled the client to progress with the approximately £2 million purchase following the initial lender decline, while balancing the required borrowing, monthly commitment and anticipated future liquidity. Please note: A mortgage is secured against your home. Your home may be repossessed if you do not keep up repayments on your mortgage or any other debt secured on it. With an interest-only mortgage, the capital balance remains outstanding and an appropriate repayment strategy is required. Mortgage availability and lending are subject to individual circumstances and status.