Alan Lakey is senior partner at Highclere Financial Services
Firstly, my advice assumes that the CCJ and two missed mortgage payments are the only adverse credit items and that the CCJ has now been satisfied. Advice at this stage must necessarily be vague because the ultimate lender and loan will depend upon the projected income and percentage of property value borrowed.
Whilst a number of lenders will accept a 10 per cent deposit Andrew is likely to be better served by placing a 15 per cent deposit cent which reduces the lenders risk and therefore the interest rate. Additionally an emergency fund is essential to cover periods without a tenant and other potential outlays. Assuming £5,000 is put aside for this and the property purchase costs each total £1,600 this leaves £34,800 for the deposits. This implies a maximum purchase price of £115,000 each and a loan of £97,750.
On this assumption I would be looking towards SPML which is likely to accept the historic adverse and offer a 2 year fixed rate of 6.09 per cent. They offer a choice of application fees which determine the rental income requirements. A fee of £795 allows a calculation based on 110% of the rental income. In this instance a requirement of £546 p.m. rent. If this is not feasible they will allow a fee of £1,295 and accept £496 p.m. rent.
There is an argument that Andrew should perhaps purchase one property and wait before purchasing the second. Now does not appear a good time to jump into the BTL waters with both feet.
Lynsey Mitchell, is head of sales and development at SPML
Property prices in the Warwickshire towns of Warwick, Leamington Spa and Stratford-upon-Avon are high, and rental values can often be only slightly higher than the mortgage repayment. A high quality two bedroomed flat in the area could easily cost £200,000. Therefore, with £21,500 deposit for each property, Andrew will need a mortgage product that allows up to 90 per cent LTV and also accommodates his past CCJ and mortgage arrears. Assuming that he borrows £180,000 on each property at 90 per cent, he needs to find a mortgage product with a rental calculation that fits a monthly rental of (say) £950 – which is currently a reasonable figure for a high quality two bedroomed flat in these locations.
SPML’s Buy2Let product (available only via our online DIP) allows up to £1000 CCJs in the last two years with none in the last six months, and no arrears in the last 12 months. There is a two year fixed rate option (to 1 March 2009) of 6.19 per cent at 90 per cent LTV and, assuming Andrew opts for interest only payments, the monthly mortgage on £180,000 will cost around £930 per month. On the Buy2Let product there is a 100 per cent rental cover option, which means that - if the properties can be rented out for £950 per month – then this product would fit. There is an arrangement fee of £1295 for the 100 per cent rental cover option but, if required, this can be added to the loan up to 95 per cent LTV.
David Hollingworth is mortgage specialist at London & Country
There are some big gaps in the detail of Andrew’s circumstances that will need to be filled. Required information will centre not only on Andrew’s personal circumstance but also on the properties that he has in mind.
Firstly, it needs to be established just exactly what the extent of the credit difficulties were and what the state of play is now, particularly whether the CCJ and mortgage arrears been paid up to date and if so when they were settled. If the problems were remedied quickly then there could even be a chance of placing with a mainstream Buy to Let lender rather than having to look to non-conforming lenders.
Another issue is how much of a deposit the inheritance represents and Andrew will need to budget for other purchasing costs. Finally, the rental coverage will be key in product selection and whilst 100 per cent coverage is feasible, he needs to be wary of leaving himself without any leeway, should rates increase.
