Large Loan Mortgages
Most banks consider any mortgage over £500,000 to be a large loan. This is where the level of underwriting and scrutiny of a mortgage application steps up a level.
Mortgages of up to £2m tend to attract better rates with high street lenders, however over this amount the high street banks tend to lose their appetite as they see ‘too many eggs in 1 basket’.
Over £2m tends to be Private Bank territory, where presenting the case properly to the right lender is crucial. Private Banks have more flexibility when making lending decisions, and rather than a rigid lending policy they can act ‘case by case’. Knowing the right bank for the right client is crucial.
Andrew had an 80% share in a digital marketing company that was doing very well. Andrew had been given tax advice to keep the dividend drawings under the highest rate of tax, so that they could be drawn at a later date under a more favourable tax rate as the higher rate of tax reduces.
Andrew and his wife Harriet also had a 100% share of another limited company, a spin off from the first. They had just prepared their 2nd years accounts and were in the process of finalising those accounts. No dividends had been drawn from this company, all of the profits had been retained.
Andrew & Harriet wanted to sell their existing property and buy another for £3m with a £1.8m mortgage. Although they had been told that only a Private Bank would take this mortgage, incurring an arrangement fee of 0.50% of the loan (£9,000), we successfully placed with a ‘large loan’ team at a high street bank with a flat fee of £1,999.
As the clients were majority shareholders in both businesses, the bank was happy to base the assessment of income on the company profits, even though the dividend drawings were much smaller.
The 2nd company profits were combined with the 80% share of the main company to justify this. Most high street banks would only use salary and dividend drawings, others would only take 50% of the income from the 2nd Limited Company. Neither route would have provided Andrew and Harriet with the loan they wanted.
The rate was a very competitive high street rate.