Sub-4% £1 million mortgage for clients with school fees ringfenced from affordability

Trinity Financial arranged a part-and-part tracker mortgage for clients buying a new home while managing significant school fee commitments.

The clients worked as a government employee and an investment analyst. They had a strong overall financial position, but their mortgage application was more complex because the lender’s affordability model would normally include their school fees as a regular outgoing. This would have reduced the amount they could borrow.

However, the clients also had investments specifically set aside to cover the school fees. Trinity Financial presented the case to the lender and asked for the school fees to be ringfenced and removed from the affordability assessment.

Why did the clients need Trinity Financial’s help?

Without a criteria exception, the clients would not have been able to borrow the amount needed to buy the property. The school fees were a major monthly commitment, but the clients had assets available to cover them.

Trinity’s brokers packaged the case carefully and approached the client’s bank, where they already had a premier banking relationship. This helped because the bank had a broader understanding of the clients’ finances and was more willing to assess the application on its individual merits.

The lender agreed to make a criteria exception and exclude the school fees from the affordability calculation.

Was the mortgage straightforward?

The clients were not in a major rush to complete, but they needed a lender that was prepared to look beyond the standard affordability model.

Trinity Financial did not struggle to find a lender because the clients had a good relationship with their bank and the application was presented clearly. The key was explaining why the school fees should not restrict the mortgage borrowing, given that investments had been set aside to cover them.

What type of mortgage was arranged?

The mortgage was arranged on a part-and-part basis, meaning part of the loan was on capital repayment and part was on interest-only. This helped improve affordability and gave the clients a more manageable structure. £700,000 on capital reapayment and £300,000 on interest-only.

The mortgage was set up on a two-year tracker rate. Both parts of the mortgage were priced at 0.21% above the Bank of England base rate. With the base rate currently at 3.75%, the initial rate payable was 3.96% for 24 months.

After the initial tracker period, both parts revert to a variable rate of 1.99% above the Bank of England base rate. Based on a 3.75% base rate, this would currently be 5.74% for the remaining term of the mortgage unless they switch to a new deal.

Why can school fees cause mortgage affordability issues?

School fees can have a major impact on the amount borrowers can raise, particularly for families looking for larger mortgages. Lenders usually include regular school fee payments as committed expenditure, even if the borrower has a high income.

This can reduce affordability significantly, especially when combined with other commitments such as pensions, childcare, credit cards, loans or maintenance payments.

Some lenders may take a more flexible approach if the borrower can evidence that school fees are being funded from savings, investments, bonuses or other ringfenced assets. However, this is usually assessed case by case, and not every lender will agree.

How Trinity Financial helped

Trinity Financial’s brokers helped the clients:

• Structure a part-and-part mortgage to support affordability

• Approach a lender willing to consider a criteria exception

• Use the clients’ Barclays premier banking relationship to strengthen the application

• Ringfence investments set aside for school fees

• Secure a two-year tracker rate at 0.21% above the 3.75% Bank of England base rate

• Put forward a clear case showing the clients could afford the mortgage

Speak to a Trinity Financial adviser today

The mortgage market moves fast — and the right advice can make a significant difference to the rate and deal you secure. Get in touch with our team to discuss your options.

Call Trinity Financial on 020 7016 0790 to secure a fixed or tracker rate mortgage, book a consultation, or use our appointment calendar

The information contained within was correct at the time of publication but is subject to change. It is for general information purposes and is not advice.

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