A case study

Background

Applicant 1: Nia, Nurse practitioner

Applicant 2: Aaron, Self-employed joiner

Nia and Aaron, both 38, are a married couple with three young primary aged children. Nia works three days a week in a busy GP practice, sometimes working extra hours though the NHS staff Bank to top up their joint income. Aaron runs a bespoke furniture business, employing two skilled carpenters. Following advice from his accountant, Aaron transitioned the company from sole trade to Limited company just ten months ago.

Both Nia and Aaron were keen to upsize from their three bed terrace to a larger four bed forever home so the growing children could have their own space. They found their ideal property but they needed to maximise their affordability so they could extend the kitchen.

Property details

Property purchase price: £350,000

Mortgage Amount: £315,000 (90% Loan-to-Value)

Equity: Using equity from house sale as a deposit but retaining some funds for property renovations, specifically a new kitchen extension.

Mortgage Type: Repayment

Challenges

Affordability: Nia and Aaron found they were falling short of affordability requirements necessitating a higher Loan-to-Income (LTI) ratio even when taking into account both incomes.

Many professional mortgage products do not classify nursing as a profession eligible for higher LTI, so Nia was finding she wasn’t able to take advantage of a professional mortgage with some other lenders.

They were also coming up against income assessment challenges as Nia needed a lender who would take into account 100% of the bank income from extra hours worked and Aaron, needed a lender who would consider change of trading style with less than two years of Limited company accounts.

Solution

Our Hodge Resi Mortgage provided an ideal solution for Nia and Aaron. When we assess affordability, we look at the holistic picture for income calculations. This meant we took into account Nia’s salary plus 100% of the average of six months’ bank income from extra work. For Aaron, we were able to used his SA302s from the last two years and an accountant’s reference for income projections, confirming his projected Limited company salary and dividends, as well as the last year’s net profit from the self-assessment tax return. The established business had a strong performance and substantial orders confirmed by the accountant allowed for confidence in using last year’s net profit for affordability calculations.

To further maximise affordability and repayments, Nia and Aaron took a 30 year term, taking them up to age 68, their elected retirement age.

This case study demonstrates how at Hodge, we take a comprehensive approach to addressing the financial needs and constraints of applicants. Even where they are looking to upscale their home and manage affordability, we’re here to help them leverage their professional income so they can climb the career ladder and the property ladder at the same time.

To find out more about our mortgage products, please visit our intermediaries website