Case Studies

Mortgage Case Studies

Mortgage Case Study 1 - Mark and Natalie from Lincoln

Requirements

Mark and Natalie from Lincoln approached us in 2006 about the possibility of moving to a larger property and still retaining their existing property to let as an investment.

Recommendation

As there was plenty of equity in their existing property, the solution we recommended, was to remortgage their existing property via a buy to let mortgage. This allowed them to raise a sizeable deposit for their new house and also raise all the related moving costs. The mortgage payments on their buy to let mortgage was easily covered by the expected rental income which would actually provide Mark & Natalie with a surplus each month provided the property was rented.

We arranged a buy to let mortgage with BM Solutions for the existing property and simultaneously arranged a residential mortgage with Nationwide for their new larger home.

Result

They now live in the new house they wanted, have tenants renting their previous property which is now an investment with the potential to create significant future wealth through capital growth of the property and income from the rent.

Mark says: “I didn’t realise how easy it was to do, it was originally a bit of a ‘pipe dream’, I never thought we would actually get 2 mortgages, I just wish I had done this years ago”.

Mortgage Case Study 2 - Stephen & Helen from Lincoln

Requirements

Stephen & Helen from Lincoln came to see us for some mortgage advice in the summer of 2004, with the booming market they were worried about ‘missing the boat’ and were keen to get on the property ladder, but had less than a £1,000 available towards a deposit and both had an existing car loan.

Recommendation

Following our advice, they were able to purchase a 2 bedroom semi detached property using a Northern Rock ‘together’ mortgage. This type of mortgage allowed Stephen & Helen to borrow 100% of the purchase price, consolidate their two loans and associated moving costs in to the balance to achieve all the requirements and keep it affordable.

Only 95% of the borrowing was secured against the property with the balance being lent on an unsecured basis all at the same rate. In addition to their borrowing they also had a small extra credit facility available to help them furnish their new property.

Result

Stephen & Helen were able to buy their first property without a deposit, and without a big increase in their outgoings by restructuring their debts. They were able to get on the property ladder and benefit from a rapidly rising property market which has since created considerable equity in their property.

Mortgage Case Study 3 - Claire from Sleaford

Requirements

Claire, a school teacher from Sleaford, who is an existing Client, contacted us in 2005 about the possibility of remortgaging to raise some money to extend her property.

Claire already had plans drawn up to add 2 additional rooms to her Property, and was looking to raise £23,000 for the project. There was lots of equity in Claire’s property but a remortgage would have meant paying a large penalty as Claire was 14 months into a 3 year fixed deal we had previously arranged for her.

Recommendation

With Claire having a large penalty on her mortgage and with rates having increased since she took it out, we advised Claire to keep her mortgage as it was, instead we recommended and arranged a secured loan for the required borrowing based on the same term as the mortgage. The intention is then to consolidate the secured loan into the mortgage (as it will save money due to the rate) when her current redemption period ends, as the secured loan only has a small penalty of just 1 month’s interest.

Result

Claire has an affordable loan, which was arranged in just 4 weeks, providing the money she needs to extend her property and avoided paying mortgage redemption penalties.

Mortgage Case Study 4 - Paul and Cathy from Newark

Requirements

Paul and Cathy, from Newark approached us in 2006 to see if we could find them a better deal, after being recommended by a friend. They had a variable rate mortgage with Halifax at 7.25%, and a secured loan at 9.9% both with 13 years to run and an H.P. agreement at 19.4% .

Recommendation

As Paul and Cathy liked the idea of knowing exactly what they would be paying each month, and liked the idea of fixing payments while interest rates were considered low, we secured them a 10 year fixed rate at 4.89% with the Co-operative bank, with no legal fees and no valuation fee to pay, plus the option to overpay up to 5% of the balance each year.

We also suggested they consider consolidating their 3 commitments (which represented a monthly saving of £147.00 a month) on the basis they use the monthly saving to overpay each month, as this would effectively pay off their mortgage at the 10 year point saving 3 years and a lot of interest.

Result

Paul and Cathy now have a very competitive rate and the peace of mind knowing their repayments can’t change for 10 years and the option to reduce the term by 3 years by simply redirecting the immediate savings into their mortgage as an overpayment each month.

Paul says: “With potential endowment shortfalls and rising interest rates in the news, it is very reassuring for us to know our new lower payments, won’t change for the next 10 years and we can pay it off a little quicker”.

Mortgage Case Study 5 - Mick and Sue from Lincoln

Requirements

Mick and Sue from Lincoln were interested to see if they could save some money on their mortgage back in the spring 1999 and invited Dave round to look through their finances. The only borrowing they had was an endowment mortgage with Halifax on a standard variable rate and despite having 4 young children, they were very comfortable and disciplined with their money.

Recommendation

After looking at how they managed their finances, Dave recommended that a current account mortgage would greatly benefit them. This entails, combining their mortgage, savings and current account so their income and spare money (savings) automatically worked in their favour, to reduce the interest payable and subsequently the capital balance.

We secured them a current account mortgage on an initial two and a half year capped rate with First Active.

Result

By using the current account mortgage facilities to make their money work as hard as possible, Mick and Sue were able to completely repay their mortgage balance in just under 5 years. In addition to this, their endowment policy proceeds which were intended to repay the mortgage balance will now be available on maturity for them to spend as they wish.

5 years later, Mick says: “Taking your mortgage recommendation in 1999 was the best financial decision we have ever made, I must admit I was a little sceptical at first as it seemed too good to be true. I can’t thank you enough for your advice as our mortgage is now fully repaid and we’ve still got all the endowments proceeds to look forward to when it matures. I can’t understand why everybody doesn’t have one of these mortgages!”

Mortgage Case Study 6 - Liam from Grantham

Requirements

Liam, a 36 year old plumber from Grantham called us out of desperation in 2005 after being referred to us by a colleague. Although Liam had recently found full time work, he was faced with repossession due to several debts, which became unmanageable after a long period of unemployment following a redundancy.

For a time, Liam was effectively increasing his debt via credit cards in order to meet monthly repayments on all his commitments. This couldn’t last and after a while, payments were missed as he had very little income and still had to put food on the table. His mortgage lender had just applied for a repossession order when he contacted us.

Recommendation: We were able to buy some time for Liam by immediately speaking with his mortgage lender and convincing them we could get a quick solution to repay the debt owed to them and stop the repossession.

As Liam had a lot of equity in his property and a full time permanent job, we were able to consolidate all his debts to clear everything with all his creditors whilst reducing it all to an affordable level and basically giving him ‘a clean slate.’ We secured a mortgage with First National, who are a lender that deal with borrowers with impaired credit.

Result

Liam’s existing mortgage lender and creditors were happy with this arrangement, and allowed the remortgage to go through. Although the rate is slightly higher than normal high street rates, Liam has an affordable mortgage and the opportunity to start again and get his credit repaired which should be back to normal in 2 years provided Liam makes all his mortgage repayments on time.

In addition to this we also arranged mortgage payment protection insurance to cover Liam against any future accident, sickness and redundancy.

Liam says: “After a very tough 10 months it feel like a massive weight has been lifted from my shoulders, thank you very much for all your help, I had almost given up hope, the call to you was my last ditch attempt and thankfully it paid off”.

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Pension Case Studies

Pension Case Study 1 - Mark from the Peak District

Requirements

Mark from the Peak District contacted us in 2006 about his frozen personal pension with the Pearl. He was seeking a second opinion as his current adviser had stated ‘it’s fine – leave it where it is’ though the fund hadn’t grown in value for the last few years!

On completion of a letter of authority we forwarded a charging and analysis form to the current scheme and found the client was invested in ‘With Profits’. Unfortunately, as stock markets had tumbled between 2000 and 2003, the Pearl had stopped paying annual bonuses on its With Profits plans and indeed had not paid a bonus for the last 3 years. Similarly, its annual bonus for the year of review was declared as 0%.

Recommendation

We therefore took a new and fresh approach to this client’s pension planning as he was embarking on a programme of buy-to-let property investing and expected this to form the majority of his income in retirement though he still wanted his pension fund to be maximised.

We simply transferred his pension fund to a new provider and established a portfolio of funds with some of the top fund managers in the world and agreed to review the fund every 6 months.

Result

The client is now very happy that his pension fund is ‘working’ for him and his future and even has started regular contributions again to maximise the tax benefits allowed.

Pension Case Study 2 - Rob

Requirements

The taking of pension benefits has become far more flexible in the last few years as was proved to a recent client. Rob contacted us late 2007 as he wanted to access the tax-free cash from his personal pension funds for a variety of reasons, though didn’t necessarily need the income as he was still in full time work.

His current pension provider had supplied their income figures should the client want to purchase an annuity from them. As the client had the benefit of an ‘open market option’ i.e. he could shop around for the best annuity rate, he thought he could see if we could improve on the rate he was offered.

Recommendation

We examined Rob’s situation and objectives and decided as he was only 53 and intended to work until at least 62 or 63 then would like to consider working on a part-time basis to 65, that perhaps the purchase of an annuity was not the best advice.

We then advised Rob to take his tax-free cash and then to invest in an unsecured pension (income drawdown). The client now has the option of taking an income between an upper and lower limit. He chose the lower limit, which is NIL i.e. there is no need to take any income!

His fund now remains invested in a portfolio, which is regularly reviewed and is building up for the future when he needs to take an income and this could be to coincide with working part-time at the age of 62 or 63. As the fund remains invested this provides added security to the client that should anything happen to him a fund remains to provide income or a lump sum (subject to a tax charge) for his wife.

Result

client is delighted as he thought his only option was the purchase of an annuity and he had to take an income he didn’t need. He also loves the idea of being able to take an income in the future between a range of limits to coincide with working part-time whilst maximising the fund to potentially produce higher levels of income for the future.

Pension Case Study 3 - Carl

Requirements

For most clients, investing in a personal or stakeholder pension is fine for their needs as long as the funds are reviewed regularly and they can see positive returns.
For some, however, a greater degree of freedom and choice are needed.

Carl, one of our long term client’s was the owner of a small business and he developed an interest in stocks and shares, so we set up a unit trust portfolio which he took an extremely strong interest in.

‘If only pension funds weren’t so dull’ he once stated as I reviewed his personal pension - £65,000 in a typical pension providers ‘Managed’ fund.

Recommendation

Actually, Pensions don’t have to be dull especially when you consider investing in a SIPP – a Self Invested Personal Pension. So we showed Carl how they work and how diverse the investing can be and then went ahead and arranged one for him.

SIPP’s operate in exactly the same way as personal pensions i.e. we get tax relief at our highest marginal rates, the funds grow virtually free from tax, we can access the benefits between ages 55-75 (from 2010) and 25% of the total fund is available as tax free cash.

Where they differ from other pensions is their huge investment choice. The investment choices on offer includes equities and bonds, as well as collective investment schemes such as unit trusts, deposits, commercial property, warrants, trustee investment plans, traded endowment policies, hedge funds and unquoted shares.

Result

Carl no longer thinks Pension are dull and now takes a real interest in his SIPP and invests in areas he wouldn’t previously have considered.

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Investment Case Studies

Investment Case Study 1 - Dave & Rebecca

Requirements

Dave & Rebecca had to save – they had three young daughters all very bright and all destined for University. They were also very keen on ensuring their daughters all had weddings to remember.

So that’s 3 weddings and 3 lots of University fees – ‘Yikes’! they exclaimed once the calculator had stopped steaming!

With the average annual University costs totalling about £10,500 (the DfES put the figure at £10,273 whilst the NUS claim it’s nearer £10,980: University course fees are a maximum of £3,145 during 2008/09 plus the average accommodation costs of £2,580 and then bills, food, books and of course socialising!) and the average wedding costing £15,000 (for richer and definitely poorer!) you could see our poor old client had a bit of a mountain to climb.

Yet with the help of the compounding factor and pound cost averaging we set to work and maximised the most tax efficient allowances available – namely PEPs which later became ISAs and TESPs ie Tax Efficient Savings Plans.

Result

By using TESPs we roped in the grandparents. Everyone has a TESP allowance, including children, of £270 per annum (though by investing monthly we’re allowed to pay £25 to make an annual contribution of £300!). Who better to pay into the TESPs for the 3 girls than their grandparents. TESPs have similar tax breaks to ISAs where the fund grows virtually tax free and there is no income or capital gains tax to worry about.

By maximising their allowances (and persuading the grandparents to help) Dave & Rebecca and are now on course (as long as the girls don’t marry before they are 21!) to fund 3 lots of university fees and 3 fairly extravagant weddings for their daughters without the need to borrow when the events occur.

Rebecca says:, ‘We’ve worked hard to save for our girls future and to now maximise all our TESP allowances means we can contribute a further £1,500 a year, sheltered from the tax man’.

A very popular area of planning is helping clients to produce income from their accumulated savings to support income and expenditure in retirement. Once ISAs have being maximised a very useful area to consider is Investment Bonds.

Investment Case Study 2 - Claire and Trevor

Requirements

Claire and Trevor came to see us in 2005 who, after investing in ISAs, wanted to invest a further £60,000, take a quarterly income and at least maintain the capital value over time.

They were looking to achieve a quarterly income of £450 and didn’t want his original investment reduced by initial charges.

The Inland Revenue rules around Bonds states an investor can take up to 5% per year from the original investment and defer the tax. I.e. as return of capital there is no tax to pay as it can be deferred for 20 years. At this point there is only tax to pay if the investor is a higher rate taxpayer.

Recommendation

We placed their investment with a provider who offered an enhanced allocation - in this case 5%. This meant the clients £60,000 became £63,000 immediately.

By placing his investment in ‘cautious’ funds in line with their attitude to risk, only taking an ‘income’ of 3% paid quarterly and holding regular reviews, the original capital is not only being maintained, but is benefiting from capital growth.

Furthermore, as the client can access 5% of the original investment a year and is only taking 3%, this unused ‘allowance’ is rolled up for the future. I.e. they can take an extra £1,200 per year without the risk of a tax charge.

Result

Claire and Trevor are satisfied with the balance of income and capital growth they are receiving and have the peace of mind that if they want to in the future, they can increase their ‘income’ to 5%.

Investment Case Study 3 - Hannah

Requirement

Hannah is a consultant at the local hospital, she called us in 2006 grumbling about her PEP and ISA portfolio following receipt of her latest valuation.

‘I’ve been paying into these for years and all I’ve done is ‘successfully lose money’ she complained.

We evaluated her plans and found all his money, about £48,000 was invested in just one fund, a classic case of ‘putting all your eggs in one basket!’

Recommendation

We transferred Hannah’s PEP and ISA holdings to a new investment house (which the client wasn’t aware was even possible) and created a portfolio of funds which invested across geographical areas and varied asset classes.

We now sit down on an annual basis and review the funds making slight alterations if we need to.

Result

Hannah can now relax in the knowledge that her fund is being reviewed regularly and now looks forward in anticipation to our annual check-ups to see how she is doing and ensure her portfolio is meeting her objectives.

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Private Medical Insurance (PMI) Case Studies

PMI Case Study 1 - Peter

Requirements

Peter came to us in the spring of 2007 looking for a suitable private health insurance plan to meet his needs. During our initial consultation process, we discovered Peter led a healthy lifestyle and regularly played golf, did a lot of walking and also attended the gym.

Recommendation

having discussed several options we recommended a Pruhealth plan that would encourage Peter to stay fit and active and would subsequently reward him with reduced future premiums on proof (via pedometer) of this activity and associated healthy lifestyle.

With Peter being 46, the initial premium for comprehensive cover was quoted at £ 81.10 per month,, however after a few health questions we were able to offer him a 30% discount bringing the premium down to £56.77 per month.

During the policy year Peter played a lot of golf, went on walking holidays and also attended the gym, he used a pedometer to record all this activity which was then fed back (uploaded) to Pruhealth via their website.

He also attended fitness assessments and completed a more in depth health questionnaire on-line. All of these activities gave him “vitality points” which at the end of the policy year would be totaled up and qualify Peter for a discount (either 25%, 50%, 75% or 100%) off the following year’s premiums.

At the renewal of the policy in April 2008 his gross premium (in line with medical inflation) had increased to £ 86.33 pm before any discounts were taken into consideration.

Result

Peter hadn’t claimed during the policy year and because of his activity & lifestyle, he qualified for a discount of 75% off the previous years premium (£60.83) to offset against his next years premium resulting in a final monthly renewal premium of £ 25.50 per month for comprehensive private medical insurance.

In addition he has joined his local LA fitness health club and is benefiting from specially negotiated rates available to Pruhealth members.

Peter may have been paying nearly double the amount in premiums had we recommended a plan not linked to his lifestyle and wouldn’t benefit from subsidised gym membership.

PMI Case Study 2 - Peterborough based company

Requirements

A Peterborough based company approach us wanting a group private healthcare plan to cover their employees and their families. With having quite a few key employees they wanted to make sure that in the event of any medical problems their employees would get the best medical treatment straightaway to reduce absentee rates and build loyalty.

Recommendation

After reviewing the market and comparing providers across the whole of market, we recommended a group plan with Norwich Union which was the most cost effective for the level of comprehensive cover they required.

Result

A couple of years into having the plan the first claim was made. The description below is the actual words of Scott who needed the treatment:

“I was playing football 5 a side on astro-turf when I fell awkwardly and snapped my cruciate ligaments, tore my cartilage and chipped two bones in my right knee.

I went to the NHS hospital where I waited in agony for approximately 3 hours and when I was eventually seen to, I was told my knee was dislocated and given a splint and told I will need it for a couple of weeks to walk with.

It was pretty clear to me that I was not going to be able to walk on my knee even with a splint.

I then had to wait about a month for a hospital appointment and then had to wait a further 2 months for an MRI scan which revealed the extent of the injury.

I was then constantly delayed at the hospital being told I was not ready for operation and it seemed like I would never be put on the waiting list for the operation due to volume of patients. I then found out the waiting list was over a year which was quite distressing.

Luckily I found out my mother was covered with Norwich Union private healthcare through her work and I was included in the cover.

I went to see my local GP for help on how to proceed with this who told me I would not be any quicker going private and that the NHS was better equipped for this sort of operation. I wasn’t too convinced with this analysis so I went to see another GP who straight away said to go the private route if I had the cover and he wrote a letter to a specialist at a private hospital. I immediately received an appointment and after the first appointment I was given a date for my operation. In the mean time I was given physio treatment to strengthen my muscles before my operation.

All I had to do was fill out a claim form and get the codes for the treatment I was going to receive. The payments were then all taken care of directly between Norwich Union and the hospital.

I had my operation which was a success and I was really impressed with the care I received and the facilities at the private hospital.

Straight after the operation I began physio which I did for approximately 8 months and I also had regular check ups with the specialist every couple of months to see how I was progressing.

Overall I had a really good experience using Norwich Union healthcare and if I hadn’t been covered I think I might be still waiting for my operation and would not receive anywhere near the same level of care.

I am very grateful to my mum’s employer and following my experience I would highly recommend that everyone considers private healthcare”.

PMI Case Study 3 - Nigel & Claire from Lincoln

Requirements

Nigel & Claire from Lincoln who ran their own business, approached us in 2006 to review their current private medical insurance plan to see if we could either reduce the cost or get better value.

They had taken the plan a few years earlier to protect themselves as business owners and were personally funding it at a cost of £150 per month.

Recommendation

As they owned their own limited company, we recommended that they change their plan from an individual plan into a group based plan on the fact that group plans attract less expensive premiums pro-rata.

After comparing rates across a broad range of insurers we recommended an Axa-ppp healthcare group plan.

Result

For the same monthly outlay (£150 per month) they are now able to have a better standard of cover for themselves, cover a further three employees and also pay via the company and offset the premiums as a taxable expense.

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Protection Case Studies

Protection Case Study 1 - Anna from Sleaford

Requirements

Anna from Sleaford was an existing client who held a joint life assurance & critical illness policy with her husband to protect their mortgage liability. Claire informed us in 2007 she was getting divorced and would be taking on a mortgage in her own name and living on her own with her 2 young boys. She asked us to arrange new life assurance and critical illness cover for just herself to cover her new mortgage liability and gave us a maximum budget of £40.00 per month as she now had limited funds.

Recommendation

Full life & critical illness cover to protect the mortgage liability was just over £77.00 per month almost double Claire’s budget which she couldn’t afford. We recommended Claire take the full amount of life assurance to cover her full mortgage liability which equated to just over £16.00 and then use the remaining £24.00 from her budget to get as much critical illness cover we could get. We recommended Scottish Provident as the most cost effective provider and for their wide range of critical illness coverage, for a monthly premium of £40.00, Claire was able to get £38,000 worth of critical illness cover.

Result

Unfortunately due to a limited budget Claire couldn’t get the full cover she wanted but in the event of her dying, her mortgage liability would be fully repaid and in the event of her suffering a critical illness she would have a lump sum to help financially which equates to just over 2 years net household income. Some cover is better than none!

Protection Case Study 2 - Paul from Nottingham

Requirements

Paul from Nottingham was a company accountant and pretty shrewd with his finances and general protection needs apart from one area – long term income protection. Paul’s employment contract included some excellent benefits including a very good healthcare plan, a good sick pay scheme for the first 12 months, life assurance & critical illness cover. Paul approached us 2006 for some income protection advice after realizing that he was exposed if he was off work on long term sick after a friend of his suffered a similar fate and was trying to make ends meet on a combination of savings and state benefits.

Recommendation

In the event of an accident or sickness, Paul’s contract covered him for full pay for the first 6 months and half pay for the following 6 months. As Paul also had savings to fall back if required to supplement his income whilst receiving half pay, we agreed he only need to protect his income after 12 months which would reduce the risk to an insurer resulting in a smaller premium.

We recommended an income protection policy with Liverpool Victoria with a 12 month deferred period which will payout 50% (circa £22,000) of Paul’s gross annual income for less than £30.00 per month. We also recommended an increasing option so Paul’s cover will keep pace with inflation.

Result

Paul now has the peace of mind knowing if he is off work long term through accident or sickness his income is protected until he either returns to work or the policy ends (17 year term taken) at the point he intends to retire.

We often use a metaphor to explain income protection known as ‘protecting the cash machine’ – If you had a cash machine that paid out your wages each and every month without fail, would you take out insurance (against breakdown) if you could on the cash machine to make sure you always got your salary out each month? (of course you would!) Income protection is the same insurance, instead it insures your salary!

Protection Case Study 3 - Michael & Joanne from Horncastle

Requirements

Michael & Joanne from Horncastle asked us to look over their protection needs whilst reviewing their mortgage arrangements as they hadn’t reviewed them for at least 5 years (they just had one joint policy to cover the mortgage) and have also had 2 children in the meantime. Michael works full time and has a good benefits package from his employer whilst Joanne is a full time mum looking after the 2 children.

Recommendation

Firstly, we recommended a joint decreasing term assurance policy including critical illness cover with Scottish Equitable to pay off their new mortgage liability in the event of either client dying or suffering a critical illness. Then we found a gap in their cover, if either one of them were to die or suffer a critical illness, their mortgage would be paid off but there would be a significant shortfall in household income to maintain the same standard of living. Although Michael earns a good wage and could continue to work if something happened to Joanne, they never realized how much it would cost to replace Joanne in full time child care costs.

After working that if something happened (death or incapacitating critical illness) to either one of them, Joanne would need £1,200 a month to continue the same standard of living and Michael would need £600 a month on the basis he kept working.

We recommended a separate Family Income Benefit policy for both clients protecting against death and critical illness for 18 years (this covers their youngest until the age of 21), Joanne’s policy covers £1,200 per month and Michael’s covers £600 per month, both policies were set up through Legal & General and included an increasing option to increase the cover annually in line with inflation. Family Income Benefit is designed to provide a regular income (on death and/or critical illness) for a specified length of time as opposed to a lump sum.

Result

By taking out one joint (lump sum) decreasing term assurance policy and two Family Income Benefit policies, both the family’s mortgage liability and future living costs are covered in the event that either client suffers a death or critical illness.

E.g. Lets say Michael were to die tomorrow, the joint decreasing policy would pay off the mortgage liability and the Family Income Benefit policy would then pay Joanne a monthly (index linked) income of £1,200 per month until the end of the policy term (18 years) so the family can maintain the same standard of living.

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Property Investment Case Studies

Property Investment Case Study 1 - Andy from Lincoln

Requirements

Andy from Lincoln first spoke to us about property investment in the summer of 2006. He was looking to build a portfolio of 5 properties over the next 3 years and was keen to get his hands dirty by taking on some refurbishment projects, however, he had a fairly limited budget that would only stretch to 1 possibly 2 properties using traditional financing methods.

Recommendation

We recommended he look for refurbishment projects that he could buy below market value on a standard buy to let mortgages using a 15% deposit, refurbish to a high standard to create equity, then refinance against the new created value and get all his money back out ready for the next project. Within 2 months Andy had found a suitable project and was ready to proceed.

He picked up a bargain property for £76,000 and was ready to acquire it with a mortgage, we recommended a tracker product from Edeus that had no penalties as the intention was to refinance the project following the refurbishment. Once Andy became the owner he spent virtually all his free time over the next few months refurbishing the property to a very high standard. So far it had cost him a 15% deposit, legal fees, survey fee and around £4,000 in refurbishment costs.

As the refurbishment work was being completed we sat down with Andy to look at refinancing against the properties increased value to get his money back out. Andy was confident of a valuation of £110,000 so that’s what we went for and recommended an 85%, 2 year fixed remortgage deal with TMB. Fortunately, the surveyor agreed the value was £110,000 allowing Andy to remortgage for £93,500.

Result

Andy now owns a buy to let property with a tenant covering the mortgage, the whole project cost him around £18,000 to buy and renovate but after remortgaging, he has got all of his £18,000 back plus an additional £9,000 which will help towards any void periods, further maintenance and the next project.

In a nutshell – Andy has got the property effectively for FREE with an additional £9,000 simply by buying below market value (£76,000) and then creating value by refurbishing (£110,000) and then refinancing on the new value.

Property Investment Case Study 2 - Nick & Helen from Boston

Requirements

Existing clients Nick & Helen from Boston had previously used our services to purchase their existing portfolio of 3 properties and had plans to build a minimum of a 10 property portfolio. They approached us for advice in 2007 after they were offered a potential bargain by a distressed seller who needed to sell quickly due to relocation abroad. They had agreed a sale price of £79,000 and as the property was in good condition, they estimated its current value to be £100,000 on the open market.

Recommendation

As they have negotiated a deal 21% under its true market value (based on their estimated value being accurate) we recommended they use what is known as a ‘no money down’ or ‘daylight bridging’ technique to purchase the property using very little of their own money.

Even though they didn’t yet own the property, the first thing we did was to recommend an £85,000 (85%) remortgage against its estimated value of £100,000 with Mortgage Express. The valuation was carried out and only came in at £98,000 which meant the borrowing was reduced to £83,300. Once the searches were carried out by the solicitor and completion was ready, we then applied for £79,000 worth of bridging finance which was easy to obtain on providing a copy of the mortgage offer which stated the properties market value.

On the day of completion the solicitor used the £79,000 to purchase the property for Nick & Helen meaning they now owned the property and could remortgage it. So, later on the same day, the solicitor then used the £83,300 mortgage advance to pay back the bridging company and other costs (legal fees, bridging arrangement fee) leaving around £2,100 surplus for Nick & Helen

Result

a very happy Nick & Helen who had acquired a good investment property for a total outlay of around £700 (£500 for remortgage survey, £200 initial solicitors costs) and received £2,100 back on completion after all other costs paid producing a £1,400 surplus. The property has 15% equity in it created from buying below market value and Nick & Helen only required a small amount of capital (£700) to complete the whole transaction by using the daylight bridging technique.

Property Investment Case Study 3 - Colin from Grantham

Requirements

Colin from Grantham came to see us in the summer of 2007 to purchase a terraced property in Nottingham in an area with good rental demand. The property was effectively being used as 2 flats, the downstairs was used as a small business office whilst the upstairs was rented out although it was just 1 property. Colin estimated the property to be worth £140,000 and negotiated it for £127,000. His intention was to convert the downstairs part into a self contained flat and rent both flats for £375 per month as opposed to renting it as a 2 bedroomed house for £575.

Recommendation

As Colin had the resources to purchase the property for cash we recommended he did. Once he was the legal owner, Colin got the downstairs part converted making 2 self contained flats, we then got his solicitor to create a separate lease for each flat and got Colin to set up a company to act as the freeholder.

Once the 2 properties were separate legal entities and passed by local council building inspectors, we remortgaged them individually with BM Solutions taking out an 85% mortgage on both. The upstairs flat valued up at £85,000 and the downstairs flat at £82,000 making a combined value of £167,000 with £141,950 combined mortgage.

Result

Colin has 2 decent flats in an area with good rental demand with the mortgages easily covered by the rent and after paying off all refurbishment and legal costs, came out of the project with £9,200 in his pocket. By legally switching the property to 2 separate flats, Colin increased the overall value significantly from an estimated £140,000 value as 1 house to £167,000 as 2 flats.

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