Case Study: Home Mover Mortgage with Flexible ERCs

Summary

We recently helped a customer arrange a £230,000 mortgage to purchase a new home following a separation and the sale of their jointly owned property for £520,000.

The customer wanted a five-year fixed rate for payment stability, while also keeping monthly payments as low as possible by using the longest suitable mortgage term. They also preferred a product with reducing early repayment charges, the ability to make overpayments and a free valuation to keep upfront costs down.

After reviewing the available options, we arranged a capital repayment mortgage with NatWest on a five-year fixed rate. The product included reducing early repayment charges, permitted overpayments of up to 20% without penalty and included a free valuation, giving the customer a good balance of affordability, stability and future flexibility.

The Scenario

An applicant sought a mortgage to purchase a new home following a separation from their ex-partner. The applicant, a current homeowner, was selling their jointly owned property for £520,000 and required financing to secure their next home.

The applicant prioritised a five-year fixed-rate mortgage for payment stability and preferred a capital repayment basis to ensure the loan would be fully repaid by the end of the term.

Additionally, they wanted the longest possible mortgage term to minimise monthly payments and specified a preference for a product with reducing early repayment charges (ERCs).

The Challenge

This case presented several key challenges:

• Maximising Loan Term: The applicant’s request for the longest possible term required balancing affordability and lender criteria for term limits.
• Flexible ERCs: Identifying a product with ERCs that decreased over time rather than a fixed percentage throughout the five-year period.
• Valuation Costs: The applicant preferred a product with a free valuation option to minimise upfront costs.
• Payment Stability: Ensuring the applicant’s monthly payments remained predictable over the initial fixed-rate period.

The Process

A detailed consultation clarified the applicant’s financial position, priorities, and property plans. This guided the selection of an optimal solution:

1. Lender Selection: NatWest was chosen for their competitive five-year fixed-rate product, flexible ERC structure, and free valuation options.
2. Structuring the Mortgage: A capital repayment mortgage was recommended to provide the applicant with the assurance of repaying the full loan amount over time. The maximum allowable term was applied to keep monthly payments within budget.
3. Prioritising Features: Products with free valuation options were prioritised to reduce upfront costs, while ensuring the applicant’s preference for flexible ERCs was met.
4. Discussing Protection Needs: Protection needs were reviewed with the applicant, who opted to revisit these closer to the completion date.

The Solution

The recommended solution was a residential mortgage with NatWest, featuring:

• Loan Amount: £230,000, meeting the applicant’s borrowing needs.
• Interest Rate: A competitive five-year fixed rate, ensuring stable payments during the initial period.
• Term Length: The longest possible term allowed by the lender, aligned with the applicant’s goal of reducing monthly payments.
• ERC Structure: A reducing ERC schedule, offering greater flexibility if early repayment became necessary during the fixed-rate period. with the ability to overpay up to 20% without penalty.
• Free Valuation: Included to minimise upfront costs and align with the applicant’s preferences.

Outcome

The mortgage was successfully arranged, enabling the applicant to purchase their new home and start afresh. The five-year fixed rate provided financial stability and peace of mind, while the reducing ERC structure allowed flexibility for future adjustments. By leveraging NatWest’s free valuation offering, the applicant minimised initial expenses, ensuring a smooth transition into their new property.

Key Takeaways

This case demonstrates the importance of customised mortgage solutions that align with an applicant’s financial priorities and personal circumstances. By carefully selecting a lender and product with the right features, we delivered a solution that balanced affordability, flexibility, and stability.

If you’re planning a property purchase and seeking expert guidance to find the right mortgage, contact us today to explore tailored options for your needs.