"It can prove an issue with some lenders when it comes to a mortgage application if the client’s debt to income ratio is perceived to be too high. "
All of my clients come to me through word of mouth and this particular customer has been a client of mine for around five years. He’s a wealthy individual, earning a significant salary and bonus income. However, he’s also accrued around £170,000 worth of credit card debt, particularly over the last year.
Whilst he had under-estimated his level of unsecured borrowing he didn’t see it as a problem as he has the income to service the debt and, with plenty of equity in his main residence and a portfolio of 13 buy-to-let properties, planned to consolidate this debt with a remortgage.
In total, my client wanted to borrow £500,000, which included £250,000 to refinance his current mortgage and capital raising of £250,000 to consolidate debts. Even with the capital raising, this only took the mortgage to 75% LTV. However, I tried a high street lender and it didn’t like the case because of the high levels of outstanding debt.
The client initially had concerns about going off high street for fear that he would be saddled with a very high rate, but after a quick 30 second conversation, he was happy to look at alternative options.
Initially, I thought my only other option for this case would be with a private bank and that I would have to move all of the client’s mortgages across to a bank for it to be interested in the case. But before I explored this route, I phoned Brad Rhodes, national key account manager at Pepper Money, and I was really pleased to find out that they had an appetite for debt consolidation lending, supported by policy that has no set limits on debt-to-income ratio.
I actually spoke to another specialist lender, which had a slightly lower rate, but also a higher fee and so the overall cost was comparable. So, given that speed was important to this client – who wanted to move his debt away from expensive credit cards as soon as possible – I chose Pepper. I knew that once the case was agreed, it would go through really quickly and this certainty was important.
It was also really important to have a person to speak to as part of the process and this was another advantage of using Pepper, which gives brokers direct access to its underwriting team and a consistent, named contact throughout.
The deal was offered quickly, which was good news for my client as consolidating his debts into the mortgage provided an immediate saving of £3,800 a month.
This type of client, with significant income but also high levels of outstanding debt, is something we see quite often. After all, the more you earn, the more credit is open to you and this isn’t a problem if you have the income to service the debt. However, it can prove an issue with some lenders when it comes to a mortgage application if the client’s debt to income ratio is perceived to be too high. This is particularly true for clients who earn significant bonus income as not all lenders will fully consider all of their earnings from bonuses. The number of people this impacts is demonstrated by the popularity of the LinkedIn post I shared about the case, which has now been seen by more than 66,000 people.
When it comes to placing a case like this, as a broker, it’s so important to be able to speak to somebody at a lender and Pepper has got this exactly right. It's a personal touch that helps to get the deal done quickly - and it makes us look great in front of our clients.
