Delia says: It is important to find a sub-prime lender willing to remortgage within the Right to Buy pre-emption period. Michael Coates of Chestnut Finance and Georgina Maun of Mortgages PLC look at the options. Have you got a problem for Delia? Email firstname.lastname@example.org
Michael Coates is managing director of Chestnut Finance
Georgina Maun is product development manager at Mortgages PLC This scenario is typical of the circumstances many home owners are facing. With consumer debt at an all-time high, more people are finding themselves facing financial difficulties and picking up CCJs along the way. Many borrowers also realise that one solution to their problem is to consolidate expensive unsecured debts into a single, low-cost remortgage. The good news is that these clients have been able to satisfy their CCJ fairly quickly. The bad news is that it was for the large sum of 4,500. With such a big CCJ they will have to consider another sub-prime lender for their next mortgage deal as most high street lenders will be unwilling to consider an application. They will also have to find a sub-prime lender willing to remortgage within the Right to Buy pre-emption period. Most sub-prime lenders permit this after a certain time but this differs from lender to lender. At Mortgages PLC, our minimum time is six months for any of our standard products. We do not know if these clients are in arrears and, if so, by how much or for how long. If they are, this will reduce the options available to them. What’s more, only a few sub-prime lenders allow borrowers to refinance from another sub-prime lender but MPLC does. Given their situation, it is likely these clients also need a lender that will be flexible and take an affordability-based approach to assessing how much they can borrow. Affordability calculations are becoming more widespread but not all lenders have yet adopted this approach. With an outstanding mortgage of 46,000 and a desire to raise an additional 29,000 on a property valued at 100,000, these clients are looking for a 75% LTV product which is in their favour. Given that they have been in debt and suffered financial difficulties they might also find it helpful to fix their payments so they know where they stand in future. MPLC’s two-year fixed rates with no overhanging early redemption charges start at 5.37%. We ignore all satisfied CCJs and these clients would therefore qualify for our near prime plus mortgage rather than a heavier adverse product with a higher rate. Also, we use an affordability calculation and give borrowers the ability to make overpayments of up to 5,000 a year so they can reduce their level of debt when they are in a position to do so.