Introduction
We recently helped our customers in Camberley, Surrey, secure a new two-year fixed-rate mortgage with NatWest as their existing mortgage deal was approaching its expiry date.
One applicant was a self-employed company director, while the other was employed full-time. However, currently on maternity leave. They wanted to ensure their new mortgage was competitively priced while maintaining predictable monthly repayments.
The customers were also considering extending their home in the future, so they preferred a shorter fixed-rate period rather than committing to a five-year deal.
After reviewing mortgage options across the market, we recommended a product transfer with their existing lender, NatWest. This provided a competitive fixed-rate mortgage without the additional legal work and costs associated with switching lenders.
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The Scenario
Our customers were a couple in their 30s who owned a detached house in Camberley, Surrey, where they lived with their dependent child.
Our customers owned a property in Camberley. One applicant was a self-employed company director receiving income through salary and dividends, while the other was employed and on maternity leave.
With their existing fixed-rate mortgage approaching expiry, they wanted to compare a product transfer with a remortgage while considering their future plans for the property.
Both applicants had clean credit histories, and their existing mortgage balance represented approximately 53% of their property’s value.
Their current fixed-rate mortgage was coming to an end, and they wanted advice on whether to remain with NatWest or remortgage to another lender.
Mortgage Details
| Detail | Information |
| Location | Camberley, Surrey |
| Property type | Detached house |
| Property valuation | £450,000–£500,000 |
| Mortgage balance | £250,000–£260,000 |
| Existing property equity | £220,000–£240,000 |
| Loan-to-value (LTV) | Below 60% |
| Mortgage term | 29 years |
| Repayment method | Capital and interest |
| Lender | NatWest |
| Recommended product | 2-year fixed-rate product transfer |
The customers had no immediate plans to borrow additional funds but were considering a home extension in the future. They therefore wanted a mortgage arrangement that would provide short-term payment stability without committing them to a longer fixed-rate period.
The Challenge
The difficulty was establishing whether our customers would benefit financially from moving their mortgage to another lender or whether a product transfer with NatWest would provide better overall value.
We also needed to consider their self-employed income and future plans for the property.
Assessing Self-Employed Company Director Income
One applicant received income through a combination of salary and dividends from their limited company.
When assessing mortgage affordability, lenders can take different approaches to company director income. Some consider salary and dividends, while others may also assess a share of company profits, depending on their lending criteria.
With two years of trading accounts available, we needed to establish how the applicants’ income would be assessed by alternative lenders.
This was particularly relevant when comparing a full remortgage, which would involve a new affordability assessment, against a product transfer with their existing lender.
Comparing Mortgage Deals at a Low Loan-to-Value
The customers had substantial equity in their home, placing them within the sub-60% loan-to-value mortgage category.
This gave us a range of mortgage products to compare, but choosing the lowest advertised interest rate would not necessarily produce the lowest overall cost.
We needed to account for product fees, legal expenses and other costs that could arise when switching lenders.
Allowing for Future Home Improvements
The customers were considering extending their property and potentially raising additional mortgage funds in the future.
They preferred a two-year fixed-rate mortgage, allowing them to review their borrowing arrangements sooner than they could with a five-year fixed deal.
However, early repayment charges and the conditions attached to any future additional borrowing also needed consideration.
What We Did
We carried out a whole-of-market mortgage review, comparing new lender remortgage products with the retention deals available through NatWest.
Our aim was to establish which option offered the most suitable combination of cost, payment stability and flexibility.
Reviewed Both Applicants’ Income
We obtained and reviewed two years of company accounts, tax calculations and tax overviews for the self-employed applicant.
We also assessed payslips from the employed applicant, bank statements and the customers’ existing mortgage documentation.
This allowed us to understand their financial position and investigate how alternative lenders would assess the company director’s income.
We reviewed the relevant self-employed lending criteria and discussed the customers’ circumstances with the lender and its business development manager before proceeding.
Compared Remortgage and Product Transfer Options
We researched two-year fixed-rate mortgage products across the market, concentrating on those available below 60% loan-to-value.
We compared the available rates and associated costs against the retention products offered by NatWest.
Our research showed that remaining with NatWest was the more cost-effective option once the overall costs of switching lenders were taken into account.
A product transfer would also avoid the additional legal work, documentation and potential delays involved in arranging a full remortgage.
Considered the Customers’ Future Plans
We discussed the customers’ intention to potentially extend their home and how this influenced their preferred mortgage term.
Rather than fixing their mortgage for five years, we focused on two-year products that would provide predictable repayments while allowing them to reassess their mortgage arrangements sooner.
We also waived our standard broker fee for the streamlined product transfer, reducing the customers’ overall costs.
The Solution
We recommended a two-year fixed-rate product transfer with NatWest, retaining the existing capital and interest repayment structure over a 29-year mortgage term.
The recommended mortgage was within the sub-60% loan-to-value range and offered competitive retention terms.
Importantly, the customers could remain with their existing lender without arranging a new legal conveyancing process.
The mortgage provided fixed monthly repayments for two years, while the shorter fixed period aligned with their potential plans to undertake building work.
The product was subject to early repayment charges during the fixed-rate period. Any future additional borrowing would remain subject to the lender’s criteria and approval at the time.
Why This Approach Worked
Although our customers had a low loan-to-value mortgage and clean credit histories, remortgaging to a different lender was not automatically the most financially beneficial option.
Our comparison demonstrated that NatWest’s retention product offered better overall value when the costs associated with changing lenders were considered.
Remaining with NatWest also avoided the need for a full new-lender affordability assessment involving the company director’s salary, dividends and trading accounts.
The two-year fixed period met the customers’ preference for payment stability without tying them into a longer five-year arrangement.
The Result
Our customers successfully secured a new two-year fixed-rate mortgage product with NatWest.
They achieved their objective of maintaining predictable monthly repayments while avoiding unnecessary legal and mortgage switching costs.
By remaining with their existing lender, they also benefited from a simpler application process, and our standard broker fee was waived.
The customers were satisfied with the advice and the comparison of their available mortgage options, with Kerr & Watson recieving a 5 star review.
What This Case Shows
This Camberley mortgage case study highlights the importance of comparing a product transfer with a full remortgage, particularly where one applicant is a self-employed company director.
Although another lender may advertise a competitive interest rate, the overall costs of switching can sometimes outweigh the potential savings.
It also demonstrates why future plans should form part of a mortgage recommendation. In this case, a shorter fixed-rate period was more appropriate for customers considering home improvements and potential additional borrowing.
By reviewing both options, we helped our customers secure a suitable mortgage while keeping their future plans in mind.
Speak to Kerr & Watson
If your mortgage deal is approaching its expiry date, Kerr & Watson can help you compare products available from your existing lender with suitable remortgage options across the market.
Whether you are self-employed, a company director or planning future home improvements, we can help you understand your mortgage options and the costs involved.
Contact Kerr & Watson to speak with a mortgage adviser about your next mortgage deal.
