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Example Case Study

Michael and Lora are married couple and blessed with two children—Peter is thirteen years of age; Paul is nine years. Their property ownership is as joint tenants which are worth £300,000 using interest-only.

The mortgage has the support of ISA, including Cheshunt Bank £250,000 with the rest of the term being 21 years. When the original mortgage was prepared, a higher lending charge of £1,300 was paid. Because they needed a re-mortgage, they had to consult an adviser to come up with extra £40,000 for home improvements, and they needed a guarantee for the repayment of the mortgage.

The stocks and shares ISA supporting the mortgage is doing poorly and is particular about asset mix and the entire product risk. They will do all that is required, so repayment is in 21 years; if need be, they will make a higher payment. The option is to use ISA’s to fund retirement. The value of ISA’s is £14,000 going by 5th of April 2018.

Michael and Lora are gainfully employed. Michael receives an annual salary of £48,600, which is approximately £2,755 per month net. He goes with the option of protecting his monthly mortgage payments when death, illness or unemployment occurs. For Lora, her earning is 24,350 P/A (£1,384 net per month).

The lender decides to go with the new April 2014 MCOB affordability and responsible lending rules; in this case, the maximum mortgage repayments will not exceed 85% of their free disposal income.

Its calculation is net income less committed expenditure and also the expenditure when statistically assessed. The committed monthly expenditure stands at £455 per month while that of statistical expenditure is put at £900 for couples and £205 for each dependent.

 According to their adviser, the discount deal is 1% which will be for three years on a capital repayment basis for 21years; the idea is to ensure that cost is kept minimal during redecoration.

 With the new bank lender, the SVR is 3.59%. 6.00% is the lender affordability rate, and it is £6.99 per each thousand and also monthly for 21 years. Besides, loans that are over 85% of the property value at a rate of 7% would require a higher lending charge

Because payment was made by Michael for a structural survey (quite expensive) when the property was initially purchased, he is not willing to pay for a valuation. He believes the value is perfect for the market price.

With the couple holding on to the adviser’s recommendation, the adviser will have a fee of 0.3% of the agreed priced from the lender.