Alan Lakey is senior partner Highclere Financial Services
“While 100 per cent mortgages are available, it is usually better to apply a 5 per cent deposit and extend the choice of mortgage lenders. This means between £5,500 and £7,000 deposit, based on the price range indicated.
Fees and deposit on a purchase of £140,000 would eat up the £9,000, so I would advise Evan to restrict his search to the £125,000 figure to avoid Stamp Duty. This would also enable an emergency sum to be retained, something which is an essential but often overlooked consideration.
A 95 per cent advance on £125,000 is £118,750 and, using the old style income multiples, equates to 4.31 times income. This is higher than most lenders will consider, although recent enhancements at Bank of Ireland means Evan now falls within its 4.5 times calculation. If he is looking for stability, an important facet for a first-time buyer, I’d suggest its 5.25 per cent fix for two or three years.”
Mike Pendergast is an IFA at Zen Financial
“If Evan looks at, say properties priced at £120,000, he will need a 92.5 per cent loan-to-value (LTV) mortgage. He needs to be very careful indeed with this level of borrowing, as some lenders will charge him a higher lending fee which can reach as high as 6 per cent of the mortgage amount. Evan may be better off trying to save further for his deposit so he can get the mortgage amount required down below the 90 per cent (LTV) that many lenders ask for. Doing this may also help him achieve a lower product interest rate as many mortgage lenders tend to increase the rate in line with the LTV.
Also, taking into account the calculation, four times £28,000, this comes out at £112,000. Again if he can find a way to keep the mortgage loan required below this level, Evan will find lenders more willing to assist his purchase at more attractive rates, as his affordability level will be better.”
James Cotton is mortgage specialist at London & Country
“With a reasonable deposit, a good salary and little debt, Evan is in a better position than many first-time buyers out there. He will be looking to borrow a little over four times his salary, which should be achievable. However, the closer he gets to his upper limit, the more he should keep an eye on the costs.
To get as good a rate as possible, he should try and put a 5 per cent deposit down – he could put more down, but may prefer to keep some savings back for various fees and costs. One he may face is Stamp Duty, but he should be aware that it is not charged on properties worth £125,000 or less. He should also be wary of higher lending charges (HLC) – fortunately many lenders don’t charge them.
If Evan is worried about meeting payments, a fixed rate may suit him. Bristol & West has a two-year fix at 5.39 per cent, with £500 cashback and no HLC, which, for a £120,000 repayment loan, would cost him £737 per month over a 25-year term.
