Mike Pendergast is an IFA at Zen Financial Services
"Steve should have lots of options – his price range would require a mortgage of between three and four times income, which is no problem in today’s market. He will, however, need a high loan-to-value (LTV) of between 96-97 per cent, which means he should try and avoid any lenders that charge a ‘high LTV’ fee, which can be as much as 5 per cent of the amount borrowed.
If he can save so that he has at least a 5 per cent deposit, this will widen the choice available and may mean he is able to obtain a better product rate and deal. If he keeps the property below £120,000 he will save the 1 per cent Stamp Duty which would otherwise be payable. If he is employed in a certain profession such as solicitor or accountant, he may qualify for better terms with certain lenders, who will see his career path as extra reassurance that he will be able to afford the mortgage on an ongoing basis."
Alan Lakey is senior partner at Highclere Financial Services
"There a number of lenders willing to oblige on 100 per cent or 97 per cent loans and Steve has a wide choice available.
It is important to try and avoid lenders which charge a higher lending fee and also to try and ensure that any application fee can be added to the loan.
As a first-time buyer I believe it is important for Steve to consider a fixed rate so as to remove the potential for unwelcome repayment increases. This is important in the early years when furnishing a home.
BM Solutions is offering rates fixed to April 2010. No higher lending fee is charged and the application fee can be added. It advises a loan potential of up to £129,600 and is offering 5.65 per cent fixed for a £999 fee or 5.85 per cent fixed for a £799 fee.
By borrowing 100 per cent of the purchase price Steve can fund the purchase costs of £1,400 and retain the £2,600 balance as a contingency fund."
David Hollingworth is a mortgage specialist at London & Country
"Steve has a decent level of income but it looks like he has some credit commitments running alongside his student loan. These will obviously be taken into account when assessing his borrowing capacity and Steve would do well to think about just what he can afford.
The deposit is pretty small and Steve should budget for costs ancillary to the purchase, such as survey and legal costs, as well as holding some funds back for a rainy day. Thankfully at the purchase price he is considering, he won’t have to contend with Stamp Duty.
He will need a product at a high LTV, possibly even 100 per cent and should be looking to secure a deal that will not carry a higher lending charge. With products like Northern Rock’s Together deal, Steve could raise 100 per cent or more and clear more expensive credit commitment (not the student loan)."
