Sometimes, a mortgage application that appears to be on-track for a quick and trouble-free completion can suddenly hit the buffers.
When it does, it can put both the broker and lender to the test and a recent mortgage application received by Investec illustrates how a close working relationship between the two can help dig a client out of a hole.
London based mortgage broker Libby Frangiamore works for Totus Capital and specialises in helping high net worth clients. Libby was surprised to receive a call from a client for whom he had arranged a mortgage just 12 months previously.
It turned out that his client, a banker working in the City, had received an offer on the penthouse flat she and her husband had purchased just 12 months previously that was just too good to refuse, so the couple had to find an alternative home quickly.
Fortunately, they found a beautiful house in a highly fashionable area of Central London and their offer of just over £3 million was accepted. They initially applied to their existing lender for a larger mortgage, but the lender was unwilling to help because of the amount involved.
However, even when the hefty redemption fee on the existing fixed rate mortgage was taken into consideration, the overall deal was still extremely attractive, so Libby’s client asked him to arrange a new mortgage of £1.3 million which, with such a low LTV, was not a problem to place with a high street lender.
Libby explains: “To be honest, this was a very easy case to deal with. There was plenty of equity, the client earned a high salary and bonus and owned significant assets. A high street bank made an offer and the case moved rapidly towards exchange and completion. What could go wrong?”
A Second World War bunker was the answer. Just two weeks before exchange of contracts was due to take place, it transpired that an old air raid bunker in a neighbour’s garden, which was being used as a wine store, encroached under the garden of Libby’s client.
Libby continued: “Although the bunker didn’t go under the house, it caused the lenders legal team considerable consternation, because it gave rise to similar title issues as a flying freehold. Did the bunker give the neighbour any rights to my client’s land above? What would happen if the bunker collapsed and created a big hole in the garden?
“After much head scratching, the bank withdrew their offer and I suddenly found myself having to find another lender who was not only willing to help, but also able to work quickly.”
Libby had dealt with Investec Bank previously and knew James Thomson, one of Investec’s private bankers, well. He gave James a call, explained the situation and asked if Investec could take a look at the case.
James takes up the story: “This was a wholly different situation to anything I have come across before. The client’s credit standing was impeccable and with such a low LTV the deal didn’t really need much thinking about – other than the thorny issue of the Second World War bunker.
“We instructed a surveyor to take a look and report back and they confirmed that, structurally, the bunker didn’t cause any problems. It didn’t run under the house and was in a reasonable state of repair. I then asked our legal team to take a look at the case and they worked closely with the borrowers’ lawyers to ensure we had an acceptable title over the property and that the bunker under the garden didn’t create any rights to the land above.
“The whole team worked closely together to construct a deal that worked for all parties and I’m pleased to report that we were able to exchange and complete on time without any delays.”
Libby concluded: “As the old saying goes: ‘where there’s a will there’s a way’ and it certainly applied in this case. From the word go Investec had a real desire to find a solution and were prepared to go that extra mile to develop a bespoke solution for my client.
“This case showed their strengths to best effect and I’ll certainly not hesitate to use and recommend Investec again in the future.”
On reflection, it could have been worse: at least Libby’s client didn’t find a Second World War bomb in their garden!
Peter Izard as business development manager at Investec Private Banking.