Sohan Jheeta, director of Personal Investment Planning Service, says the client's CCJs will make for an expensive mortgage and he will also need to save for arrangement costs
Questions should be asked as to how Mr Harris came to be saddled with three CCJs in the first place if his income was anywhere close to the £45,000 per annum he currently earns. It would seem to me that Mr Harris needs coaching in the disciplines of money management. This may seem an unorthodox suggestion, but then he does have three unsatisfied CCJs.
Future Mortgages will consider Mr Harris' case. However, certain criteria have to be met. These are that Mr Harris should have at least one year's previous employment history and that he should have written confirmation that he will continue in at least another six months after the end of first period of contract work.
The gross income has to be verified by either a fully qualified chartered or certified accountant and, obviously, this will be yet another charge to Mr Harris. I will assume that Mr Harris does not have any other property or that he did not own any in the past six months. If he did own a property previously, then there must not be any mortgage arrears registered as this would count against him.
The lease on the flat that he wishes to purchase should have not less than 35 years to run regardless of the duration of the mortgage. Future Mortgages will charge LIBOR plus 2.5%. That is 6.7% per annum. Mr Harris should note that rate will vary as LIBOR fluctuates up and down and the rate will be reset every three months.
It should be noted that Future Mortgages does not require Mr Harris to satisfy the CCJs. This will seem to be in Mr Harris' favour for the time being, but he should really be aware that these will have to be discharged sooner or later. Moreover, I always believe that LIBOR-linked mortgages tend to be rather more expensive and, as such, I would recommend that Mr Harris should, at some time in the future, consider changing to a mainstream lender.
One suitable Future Mortgages product would be Future 90. The initial non-refundable application fee for this product is £200 and is paid when first submitting the application for the mortgage. Future Mortgages will also charge 1% of the loan amount fee – £855 in this case – and this can be added to the mortgage loan on completion. This product carries redemption penalties as well. They are 5% of the redeemed loan in the first year, 4% in the next year, and so on. Finally, in the fifth year and thereafter the penalty will be 1% of the redeemed loan amount.
Other costs are also involved in arranging this mortgage. These are stamp duty, solicitor's conveyance fee, the allocation fee, mortgage indemnity guarantee fee and broker fees if Mr Harris chooses to take financial advice. Mr Harris can expect these costs to add up to around £3,000, which he would do best to save up in addition to the £10,000 deposit he already has.
I recommend that Mr Harris should consider the capital repayment mode of repaying the mortgage loan. This should be backed by a mortgage protection plan with critical illness cover for added security.