Michael Brill is director at Baronworth Financial Services
“We presume Matt is living with his parents, has good employment history, no outstanding credit and that he has a clean credit record. We also presume that he has additional funds to pay for Stamp Duty tax, and solicitors fees, etc.
He is looking to purchase a property as a first-time buyer (FTB) to rent out. Unfortunately this is not practical as he does not appear to have a sufficient deposit to enable him to buy a reasonably priced property. Very few lenders will lend to FTBs for buy-to-let (BTL). Of the few that do, the maximum mortgage is up to 85 per cent of the property price.
As an alternative, Matt could consider purchasing a property to live in until its value increases. He has sufficient income to furnish approximately £148,000 mortgage with Cheltenham & Gloucester, allowing him a purchase price of £158,000.”
James Cotton is mortgage specialist at London & Country
“One thing that will restrict Matt is the size of his deposit. Although maximum loan-to-value (LTV) limits have been increasing, he is still going to have to put at least 10 per cent down. This would give him a maximum price of £100,000 and leave him needing a mortgage of £90,000.
The issue he would then face is to find a property of that value that could earn sufficient rent to cover the repayments. Assuming a rate of 5.50 per cent, the mortgage would cost £412.50 a month. With rental cover of around 125 per cent, this means finding a property that can achieve rental income of £515 per month plus. He could reduce this requirement, but it may mean a high arrangement fee.
Matt needs to look at properties in the area he wants to buy, how much they cost and what sort of rents they attract. If he wants to look at higher-priced properties, he is going to need a bigger deposit.”
Gerry Bell is head of mortgage marketing at GE Money Home Lending (GEMHL)
“Given Matt’s case he should bear in mind that although lenders are becoming more flexible, he will be restricted by the amount he can borrow with a deposit of £10,000. I’d advise that it may be worth saving a bit more before buying, as properties for £100,000 are few and far between.
If Matt is keen to purchase a property with his current savings, there are several BTL mortgages available in the market that he should be eligible for, depending on his employment history. With maximum LTVcurrently at 90 per cent, he could borrow up to £100,000.
GEMHL will consider self-employed applicants, who have a mortgage and have been employed for at least three months, while other lenders may ask for a longer period of employment before considering a mortgage loan.
