How to Buy a £1.2m Property with a Small Deposit and Complex Income

The Scenario

The scenario involved a senior tech consultant who sought assistance from EH Financials after a previous property purchase attempt fell through due to inadequate advice. Currently renting and owning three buy-to-let properties, he aimed to secure a long-term family home. The property in question was priced at £1.2 million and required refurbishment, with similar homes in the area valued between £1.5 million and £1.6 million post-improvement.

The Challenge

Several challenges were identified:

• A limited deposit of just over £100,000 after allocating £200,000 for refurbishment.
• Additional funds needed for stamp duty.
• Complex income streams, including bonuses and commissions.
• Existing buy-to-let mortgages.
• A need to keep monthly repayments manageable.

The required deposit for the purchase was £213,000, creating a shortfall while preserving liquidity for refurbishment.

The Strategy

Our strategy involved structuring the case across both the new purchase and the existing property portfolio:

• Arranging a £987,000 residential mortgage on the new property.
• Structuring £900,000 on an interest-only basis to lower monthly repayments.
• Allowing up to 10% annual overpayments to utilise future bonus income for balance reduction.
• Raising an additional £110,000 from two existing buy-to-let properties by redeeming and replacing existing mortgages with lenders willing to increase borrowing to 70-75% loan-to-value.

The Outcome

The final structure provided a cohesive funding solution:

• £987,000 residential mortgage secured.
• £110,000 raised from the buy-to-let portfolio.
• £1.1 million total funding towards the £1.2 million purchase.
• Full preservation of the £200,000 refurbishment budget.
• Manageable monthly repayments.

The Result

The client successfully secured a long-term family home with significant value-add potential, while also preserving liquidity for refurbishment and future flexibility. The structure allowed for the strategic use of bonus income to gradually reduce the mortgage balance.

Key Insight

Acquiring a high-value property with a limited deposit does not solely rely on increasing borrowing. It involves effectively structuring existing assets. By leveraging buy-to-let equity alongside interest-only lending, one can:

• Bridge deposit gaps.
• Preserve cash for improvements.
• Maintain manageable monthly commitments.

In this scenario, the outcome was not determined by a single mortgage but by a holistic approach to structuring the overall financial position.