They are concerned about further interest rate rises and need some budgetary stability; so are keen to get their mortgage fixed as soon as possible. They have found an ex-local authority flat to purchase for £160,000 and have a 25 per cent deposit. They have a joint salary of £45,000, although Duncan is a self-employed plumber and wishes to self-certify his income. What are their options?
Tony Cardiff is sales director for Alexander Hall
“Despite negative publicity surrounding self-cert cases, it is still readily available for the right client and at very reasonable rates. This case is a good example.
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"Self-cert is available up to 90 per cent loan-to-value (LTV) for first-time buyers and this case is well inside that. The joint income of £45,000 is sufficient to get the loan they want. However, any broker taking on this case would need to be satisfied that the income from self-employment was reasonable. In the case of a plumber who might have business expenses to deduct from gross income, I would want to make sure that the figure stated was his expected net profit, not his turnover.
"The Mortgage Business (TMB) does self-cert for first-time buyers and will lend on ex-local authority flats. It offers a two-year fixed rate through Mortgage Intelligence at 5.49 per cent. The rate is not the lowest available but it comes with a free survey and a relatively low arrangement fee at £799.”
Sharon O’ Callaghan is head of sales for LMC
“At LMC we accept gifted deposits from close family members and we do not penalise first-time buyers on any of our products. As one of the applicants is self-employed and unable to prove their income, we are able to offer a self-cert mortgage. As long as there are no outstanding credit card or loan commitments, we would consider lending 2.7 times their joint income. Providing that the applicant has no current rent arrears, they could proceed on our Product 0.
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"As the applicants are looking for the security of a fixed rate product, we can offer two options which would fit their requirements. Firstly, a two-year fixed rate mortgage priced at 5.69 per cent until 2009 with no extended tie-ins, or alternatively a two-year fixed rate product priced at 6.09 per cent until 2009 with a lower administration fee and again no extended tie-ins.”
Steve Shepherd is a mortgage consultant at Mortgage Options
“With such a large deposit and good income, Penny-Jane and Duncan will not have any issues obtaining a mortgage. However, limitations on lender choice exist through the requirement to self-certify one income and the property being an ex-local authority flat.
"The applicants require a fixed rate, and luckily, they will not enter the arena for higher lending charges due to their 25 per cent deposit. Depending on the length of time trading and proof of self-employment available, this could limit the choice further. The property itself could be their last stumbling block depending on many factors.
"Assuming Duncan has been trading some time, has a good credit score, and the flat meets criteria, TMB – through PMS – can offer a two-year fix at 5.49 per cent, with a £500 cashback on completion and £999 arrangement fee.”
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