Ramona Leavers is head of marketing at All Types of Mortgages (AToM)
Ramona answers: “From the outset, AToM would need to obtain some more information from Ben, so that we could offer him a solution best suited to his requirements. We already know that he is a residential homeowner, and the fact that he owns his own property is something that will definitely work to his advantage. This is because the majority of lenders specialising in the buy-to-let market prefer borrowers who have already held a residential mortgage for some time as they are able to demonstrate that they have proof of historic mortgage payments.
Assuming the CCJ Ben held was registered and satisfied in the last two years, Mortgages plc, Future and Platform are just some of the lenders in the market that would be able to assist Ben in his aim of buying a property to let. AToM also has in-house underwriters for these lenders ensuring quicker turnaround times. By choosing one of these lenders, Ben would be able to obtain a maximum loan-to-value (LTV) of between 85 and 90 per cent.
Currently Mortgages plc allows a maximum LTV of 85 per cent with a three-year fix at 6.15 per cent. Rental would be based on 125 per cent of the pay rate. Platform would allow Ben to borrow 90 per cent LTV. Platform has a three-year fix at 6.75 per cent with rental at 125 per cent of the initial pay rate. Future offers a three-year fix at 6.15 per cent with a maximum LTV of 90 per cent. Rental on this product is calculated at 100 per cent of the initial rate. At the moment we do not know what monthly rental Ben will be receiving, but the amount he anticipates may dictate which lender and product we would recommend to him. Based on the above lenders and rates, Ben would need to obtain a minimum monthly rental income of £941 with Mortgages plc, £1,139 with Platform and approximately £830 per month with Future.”
Jane King is a certified financial planner at Ash-Ridge
Jane answers: “As a novice landlord, Ben needs to take into consideration other issues in addition to a mortgage. He will have additional expenses such as Stamp Duty, legal fees and arrangement fees to consider. I assume he may be considering letting to students – however many lenders are not keen on letting to multiple tenants and many students do not respect property in the same way as a family would. As a first-time landlord, he will have to find a deposit of around 10 per cent of the purchase price and although he is on a fair salary he is already paying one mortgage and will have to make allowances for funding the second property in the event that he cannot find a tenant. He does have the option of borrowing against the potential rental of the property or against his guaranteed income and this should be calculated in order to arrive at an appropriate solution.
The CCJ Ben has may not make much difference to his borrowing power if it is fairly old, but he will not be able to go to full status lenders who do not accept any adverse credit. That said, there are some good buy-to-let deals available at the moment. However a number of them have substantial arrangement fees which, if added to the loan, would make the repayments more expensive. Assuming he may sell the property later and realise the capital growth there may be a good case for an interest only loan. However there may be capital gains tax to pay on the proceeds, which will also have to be factored into any investment aspirations Ben has.”
