Keith Robinson, managing director, National Guarantee says that the nature of Mr Thompson's business will be an important factor in choosing the best lender Traditional lenders still tend to view clients who have previously had a CCJ registered against them with suspicion, normally limiting the amount of the CCJ to £250 and insisting that it is satisfied. Even at a relatively low loan to value of 70%, many high street lenders are still likely to shy away from lending to customers who have two CCJs, even though they have been satisfied in this instance. Couple this with mortgage arrears within the last 12 months and it's fair to assume that Mr Thompson will only be considered by sub-prime or 'impaired credit' lenders.
Latest estimates suggest that one in four adults fall into this category and, with such a large amount of business to attract, sub-prime lenders have been quick to remove any stigma attached to borrowing from them by offering some great deals at competitive rates.
There are many suitable lenders out there who would readily help Mr Thompson and his fiancé buy a property together, but is it a simple task of finding the cheapest rate? Mr Thompson admits that his past problems stem from the seasonal nature of his hotel business – his income stream slowing down during the winter months. This is an important factor in deciding upon the best lender.
Flexible mortgages have become increasingly commonplace in the mainstream arena, but Britannic Money has recently launched a range of sub-prime flexible products. The beauty of this is that Mr Thompson could overpay (by up to 10% of the original lend for each year during the first three years) without penalty during the peak season, and take a payment holiday or make underpayments when business slows down over winter – easing the burden of making his mortgage commitments every single month. Because interest is charged daily, by making overpayments he would receive the added benefit by seeing an immediate saving in interest and therefore reducing the mortgage term.
Any self-employed applicant would benefit in a similar fashion. By overpaying each month (saving interest in the process), they can then draw down the funds easily in order to pay their annual tax bill.
Savings can be used in the same way, by transferring them from a separate account onto the mortgage account, the balance is instantly reduced saving interest and the money can be drawn down as and when required. It appears that the clients can prove sufficient income to cover the proposed borrowing, but Britannic Money also offers a self-cert option up to 85% LTV for the self-employed.
The Fresh 1 scheme would be suitable at a rate of 6.71% discounted to 5.21% for a year from completion. The scheme allows for up to six missed payments in the last year, providing none have been missed in the last six months. In addition to this, up to £3000 CCJs are acceptable up to 90% LTV. The Fresh 2 & Fresh 3 schemes cater for clients with more adverse with identical flexible options.