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Lender response

John Maltby, chief executive of Kensington Mortgage Company, says that rising property prices will open up more options to Mr Harris when he comes to move

Mr Harris&#39 previous credit history and his inability to prove his income means that he is unlikely to obtain a mortgage from a mainstream lender, even though he requires a low income multiple in relation to his anticipated earnings. He will, therefore, need to obtain a mortgage from a specialist non-conforming lender and should seek professional financial advice about the options available to him.

Mr Harris&#39 immediate task is to find a mortgage so that he can get a foot on the property ladder. Although he will have to pay a slightly higher interest rate because of his risk profile, this will be offset by any capital appreciation in his chosen property, which would increase his options for future house moves.

Importantly, he will have taken the first step towards paying his mortgage off sooner in life. After a few years of paying his mortgage, Mr Harris will have full trading accounts for his business and will have improved his credit record. He will then have more choices open to him and may be able to remortgage to a lower interest rate product from a mainstream lender.

Back to the present though. Mr Harris needs a mortgage that will take account of his CCJs and allow him to self-certify his income. There is a wide range of non-conforming mortgages that cater for all levels of adverse credit, but the options are fewer at high loan-to-value levels.

Kensington Mortgages&#39 VL5 self-certification mortgage caters for very low levels of adverse credit and LTVs up to 90%, which fits Mr Harris&#39 requirements. It allows for CCJs up to £2,000 or previous missed payments on secured loans, but not both. This means that Mr Harris would obtain a reduced interest rate over similar Kensington products that allow for both. The product is MIG free, interest is calculated daily and there is no obligation to buy tied products. Redemption terms apply for the first three years.

Depending on Mr Harris&#39 attitude to risk, he could opt for either a discounted or fixed interest rate. The discounted interest rate is currently 6.45% and the fixed rate is 7.24%. Both rates revert to the standard variable rate on August 31 2003, which is currently 8.2%.

Monthly capital and interest payments over 25 years would be £571.27 on the discounted rate or £613.84 on the fixed rate, reverting to £664.67 and £665.95 respectively after the discount or fixed period. These payments should be comfortable for Mr Harris in view of his anticipated earnings and so he should consider reducing the term of his mortgage. The payments over 20 years would be £631.24 if discounted, reverting to variable payments of £718.11. This would enable Mr Harris to pay more capital off and reduce the total amount of interest he pays before he is able to remortgage to a mainstream lender. He should take further financial advice in this regard.

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