A broker who’d not placed business with us before recently contacted one of our BDM’s with a case which was causing her a real headache. She’d already DIP’d it with 3 lenders and all had said no.
Her clients, Mr and Mrs Jackson live in a small rural village and their house adjoins the village post office. As is becoming all too common, the post office has recently closed its doors for the last time – this is an exciting opportunity for the Jacksons though who want to buy it and knock-through to create one large family home.
Their current home is worth £365k and their mortgage is only small. The purchase price of the post office will be £335k and the combined end value of the enlarged house will be £800k, giving them a small uplift in overall value – as well as a fabulous home for their family.
Mr and Mrs Jackson have some savings, but they’d like to buy the property through borrowing and keep their savings for the conversion works. They therefore need to borrow all of the purchase price of the new part of the home.
Their existing lender has a rather inflexible outlook and isn’t willing to assist, both due to the scenario and because they are self-employed. The Jacksons run an unusual company and whilst they had a strong net profit figure last year, they only took minimal dividends as they pursue a sensible strategy of leaving the profit as retained earnings in the company where possible. Although the company also turned a profit in previous years, the performance was not quite so strong and this also made their current provider nervous, despite the fact that they could demonstrate year on year improvement. This lack of understanding was in turn making the Jacksons very concerned that they would lose this once in a lifetime opportunity to purchase the property next door and create the home of their dreams.
Through some creative and sensible thinking – based on their actual circumstance, Furness Building Society was able to offer a solution which provided enough funds to purchase the new property using the equity from their existing house. This was achieved by engaging a Valuer at an early stage and providing them with full details on the conversion plans and costings to enable them to make an accurate end valuation. The overall LTV ended up being 55% on Day One and so we agreed to allow the works to take place to knock the two properties together, with a condition that the titles were merged within three months. We took a first charge over both properties until the titles were merged and as planning permission could not be obtained until they owned the property, we retained a portion of the funds until this could be sorted out.
Aside from the complicated situation with purchasing the property, our individual approach to underwriting meant that we were able to take a pragmatic view of income assessment. We spoke to their accountant who confirmed that their business was strong and would improve further, and who explained that the previous dip in profits related to one bad client who was no longer part of their trading plans.
As you will know, these types of cases can provide some real challenges. They don’t always fit the business model of a large credit scoring lender and really need a mortgage provider who can take the time to look at the case in some detail. The broker could of course have arranged bridging finance to sort out the works and then re-mortgaged later, but this would have incurred far greater costs, not to mention unwanted hassle for the Jacksons.
The real icing on the cake however was the fact that we made our entire product range available. The family was able to benefit from a market-leading 2-year fixed rate product available at the time.
We love to help people like Mr and Mrs Jackson, and we love to make it easy for you to say yes. We’re experts in reviewing unusual cases that don’t fit the mainstream – contact our BDMs now on 0800 9881561 with any case which would benefit from the personal touch. Or send us a message and we'll call you back.
Alternatively, if you deal with a Business Development Manager already, contact them directly
This case study is based on a real case but the names and some details have been changed and stock images have been used to protect confidentiality.