“Why should I use a Mortgage Broker?”
As a consumer when looking to mortgage or re-mortgage a property, it’s your choice whether or not to use a broker. For example, you can go direct to your existing lender; speak directly with a new lender; or use a broker.
There are pro’s and con’s with all these options. I hope the Case Study below illustrates what a good mortgage broker can do. And how they can add value to the mortgage application process on behalf of a client.
Our client Liquidated a Limited Company. As a result he was made liable for Personal Guarantees signed, whilst a Director of the Company. These creditors were being aggressive in their pursuit of the debts and the client was at risk of being declared bankrupt. The outcome of this action would be the forced sale of his BTL property and restrictions on running his business.
The most important issue for our client was repayment of Personal Guarantees, consolidation of credit card debts and avoiding bankruptcy.
Recent company liquidation is viewed very negatively by lenders. Many will only look at a re-mortgage application after a specific period of time has passed, normally 2 years. In addition the consolidation of business debts, which in this case are PG’s is normally not acceptable to a lender.
Our client was also having trouble proving income. As he previously took dividends and salary from the liquidated company. His SA302s demonstrating this income could no longer be used due to the recent liquidation. He was in receipt of income from the BTL property and this would suffice with some lenders. However, profit over the last two years was low due to ongoing refurbishments of the property and this would be a concern for lenders.
The overall household income and expenditure was positive as the clients wife worked and had BTL properties in her own right. However, bankruptcy would have a negative impact on their financial position and would result in them having to vacate the property they rented as tenants.
Our clients options were limited to proceeding with bankruptcy or formal insolvency procedure such as an IVA. Trying to negotiate affordable repayment plans with his creditors or selling his BTL property.
Following many hours of discussions with lenders at Senior Level, submission of rationales for lending and producing detailed financial forecast. And despite our proposal being outside of Underwriting Criteria. Two lenders agreed that they would be prepared to re-mortgage the property, as it was in the best interest of the client and his family.
Our client was able to re-mortgage his BTL property and raise £230,000 to consolidate Unsecured Borrowing, PG’s and repay his current lender. The new lender offered a 5 year fixed rate mortgage product at 3.55% and monthly repayments were £649 on an interest only basis.
The client was delighted as this enabled him restructure his debt and to continue running his other businesses as bankruptcy was avoided.