Roy New is a London-based sole broker
“Iona has seen her £150,000 mortgage cost rise and has decided to downsize, favouring a £125,000 property with a £25,000 deposit, working out at 80 per cent loan-to-value (LTV).
"The bad credit situation is, unfortunately, becoming more common as the Bank Base Rate rises begin to bite and have the desired effect.
"I would first ascertain if the history of the CCJ/defaults, is favourable and, if this is the case, place her with a prime lender. A telephone call to an underwriter can sometimes produce excellent results. But if this is not the case, I would place her with a non-conforming lender.
"SPML and Advantage have a few products that are suitable for Iona’s requirements.
"I would also recommend that the bad debt is paid and cleared and Iona keep her nose clean for one or two years during the discount/fixed/redemption period and then remortgage with a prime lender for a superior rate.”
Sharon O’Callaghan is head of sales at LMC
“At LMC, our product range is designed to cater for clients based on the number of CCJs, rather then the value. In addition, we do not take defaults into account when assessing which product is most suitable.
"LMC accepts income from multiple sources for both employed and self-employed borrowers. The self-employed verified income element will be based on the last year’s share of net profit as certified by a qualified accountant.
"Based on the facts given about Iona’s income and financial commitments, we could lend the required amount with no higher lending charge.
"The product that best suits Iona’s needs is our Product One status two-year fixed rate. It has a rate of 6.44 per cent fixed until 30 November 2009 with no extended tie-in and a 1.5 per cent arrangement fee, which can be added to the loan.”
Thomas Reeh, is chief executive of blackandwhite.co.uk
“Iona would be able to source her mortgage from one of several non-conforming lenders who would ignore her defaults, but take into account her CCJ. It would probably use a debt-to-income calculation to ascertain affordability which would typically permit a maximum monthly payment, at standard variable rate, of 40-50 per cent of her gross monthly income, adjusted for any unsecured credit commitments.
"If we assume she has no remaining unsecured credit, this could produce a maximum allowable payment of £1,250. However, recommending such a high payment would be subject to careful scrutiny of her other commitments.
"The stability afforded by a fixed rate mortgage would probably suit Iona best. Currently a typical 25-year capital repayment mortgage with a three-year fixed rate and taking account of her CCJ and defaults should cost her approximately £700 per month.”
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