Kevin Paterson is managing
director of
Park Row Mortgages
“First, I would filter out all lenders with an extended early repayment penalty and stepped products, as I personally don’t like them. As an exercise, I would run the stepped products as well, as I am sure there are those who would say a stepped product may be ideal for a first-time buyer, given the likely increasing income curve this borrower will experience.
The best deal I found was a branded exclusive through Manor Mortgages of a Bristol & West product which offered 5.14 per cent in year one and 5.84 per cent in year two, with no fees. For a £140,000 mortgage, this would cost around £785 per month on a repayment basis. However, if we avoid stepped products, the best deal is 5.49 per cent with Alliance & Leicester, which gives repayments of £803 per month. Arguably, the second year hike in payments on the stepped product will more than erode the year one savings.
James Cotton is a mortgage specialist at London & Country
“Bill shouldn’t have many problems getting a suitable mortgage. He can afford to put down a 5 per cent deposit, although with a wide choice of 100 per cent deals, this is not essential. Assuming he finds a place for £130,000, a 5 per cent deposit would equal £6,500, leaving him with cash left over for Stamp Duty and other costs. He would then need a mortgage of £123,500 – just over four times his salary and within most lenders’ criteria.
He should make sure he avoids higher lending charges (HLCs). Lenders such as Nationwide, C&G, Woolwich and Northern Rock do not charge HLCs and others such as Portman and Bristol & West have HLC-free deals.
As he is looking at properties over the current nil-rate Stamp Duty threshold of £125,000, Bill should keep a close eye on the Budget this week. An increase in this threshold could save him £1,300.
Simon Tyler is managing director of Chase de Vere Mortgage Management
“Bill is on quite a tight budget, but does have a 5 per cent deposit of £7,000, which opens up a good range of mortgages, while leaving him enough money for Stamp Duty and fees.
It is crucial he avoids mortgages that levy HLCs since this will add significantly to his costs and for no good reason. It also makes sense for him to take a fixed deal, as rates are on the up.
Portman’s five-year fix at 5.48 per cent, available to 95 per cent and with no HLCs, seems ideal. It has a reasonable arrangement fee of £599, which can be added to the loan. Repayments on a £130,000 loan would be £806.04. If this proved too much, he could always take an interest only loan for the first two years, which would reduce repayments to £593.67. If he wanted a shorter option, he could take Portman’s three-year fix at 5.39 per cent.”
