Blog Archives

Jay-Z and Beyonce’s $53m mortgage…

30.08.2017

It seems that even wealthy people need mortgages with news that hip-hop star Jay-Z and his singer wife Beyonce financing the purchase of their $88m Los Angeles mansion with a whopping $52.8m mortgage.

A 60 per cent loan-to-value mortgage is pretty high, taking into account the quantum of the loan. Lenders – in the UK, this would undoubtedly be a private bank – would normally limit LTVs on such a loan size to circa 40 to 50 per cent. In terms of the monthly cost, assuming a pay rate of 3 per cent, the couple would pay $132,000 per month on interest only or $250,000 on a repayment basis.

Assuming an income multiple of five times income, we can also assume that the couple have a minimum annual income of $10.56m.

It is likely that the bank would insist on having assets under management (AUM) for a loan this size so it is possible that they have also invested assets to the value of $26.4m with the lending bank. An eye-watering amount for us mere mortals but presumably a drop in the ocean for one of the richest couples in the world.

Jonathan Harris
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Jonathan Harris

Equity release for landlords

21.08.2017

A lender has launched an equity release product which can be taken out on a buy-to-let property or second home, rather than your main residence.

Landlords will receive a lump sum upfront with interest rolling up for the duration of the loan, enabling them to release money from a buy-to-let and not pay the mortgage interest each month. There are no affordability checks so it may appeal to the owner of a buy-to-let property who does not qualify for a standard buy-to-let mortgage. However, borrowers should be warned that the rate of interest is higher – from circa 6.24 per cent AER – than on a regular buy-to-let.

The minimum age for applicants is 55-years-old, which is low, but the lender will only lend circa 9 per cent loan-to-value to someone that age; otherwise, interest would potentially compound over a very long period. Older borrowers can borrow higher LTVs so a 70-year-old can borrow circa 24 per cent, while an 80-year-old can borrow circa 34 per cent. We believe this product will be targeted at those in their seventies and beyond as this is where conventional buy-to-let lenders do not tend to accept new applicants. The maximum age of a borrower is 90 – again, most buy-to-let lenders would not contemplate lending to someone this old.

The maximum property value against which the product can be taken out is £6m, which is encouraging, as many equity release providers will not lend against such an expensive property.

Borrowers should be aware that there are early repayment charges for the first eight years of the loan so it is not a short-term solution and the mortgage can’t be ported to another property. Independent advice from a broker who specialises in equity release such as Anderson Harris, is vital before taking out such a product to ensure it really is the most suitable solution.

While the product is expensive, it is innovative and could lead to other lenders following suit, which would bring the pricing down. There is an option to service the interest will also appeal to some borrowers.

Adrian Anderson
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Adrian Anderson