Delia says: Nicola’s situation is not uncommon as Mark Bergin of DB Mortgages and Darren Pescod of The Mortgage Broker explain. Have you got a problem for Delia? Email firstname.lastname@example.org
Darren Pescod is managing director of The Mortgage Broker
Based on the information you have provided we should be able to place this mortgage without too much fuss.
The CCJs are not a problem as a lot of lenders are now flexible in their approach towards people with minor credit problems. But Nicola will be slightly penalised with regard to interest rates.
The main restriction in placing this mortgage is the length of time Nicola has been self-employed – most lenders require a person to be self-employed for more than 12 months – and the fact that she only has access to a 10% deposit. A few more lenders would consider this mortgage if a 15% deposit was possible.
But there are still a few lenders we can place the deal with such as Kensington Mortgages and GMAC-RFC. These specialise in mortgages for applicants with adverse credit histories who have been trading for less than 12 months and who only have a 10% deposit.
Unfortunately, lenders will not entertain Nicola’s previous self-employment as they only consider the amount of time a new venture has been in operation.
If you like the idea of fixed rates, I recommend Nicola considers a two-year fixed rate product with GMAC-RFC. It has a product called light adverse self-cert which allows trading for six months and CCJs of less than 3,000. Its fixed rate is 6.8% with no extended tie-ins after the two-year period and minimal fees. GMAC-RFC would require proof of trading and this would be done by a call to Nicola’s accountant.
The fixed rate will offer her some stability with her new mortgage commitments and business venture. At the end of the two years she will be free to refinance the property and by then she will have been trading for over 18 months and the CCJs will be over three years old. This will allow us to go to a high street lender and try to obtain high street rates.
An alternative I would like Nicola to consider is to wait for another three months before applying for a mortgage. At that point she will have been trading for 12 months. This will allow her a wider choice of lenders including Amber Homeloans and BM Solutions.
Mark Bergin is director of sales and marketing at DB Mortgages
Having spent several years running an arrears and collection department for a mortgage lender I can appreciate that many incidents that cause financial problems are due to events beyond the control of borrowers.
Many lenders will now consider borrowers with adverse credit histories. But before speeding off down the sub-prime route I note that all Nicola’s CCJs were satisfied over six months ago. Regardless of their total value, this leaves her with a clean record as far as we are concerned. She would therefore be eligible for any of our products including our near prime plus deal.
I also see that she is a second-time purchaser with a 10% deposit. But no details are given about whether she is able to provide income details after only nine months’ trading. This is not a problem with us as we will accept self-employed people on a self-cert scheme after only six months’ trading and for up to 90% LTV. Should she be able to provide proof of her income she would be able to secure a more favourable rate on a full status mortgage.
There are no outstanding items from her previous company that was jointly owned and so again there is no reason she should not be treated at the top end of our pricing with the near prime plus product.
What we don’t have is any record of her previous mortgage conduct so I assume that it was paid with no history of arrears. It seems that the business and the previous property were treated as priorities in the payment stakes and some unsecured debt was left unpaid, resulting in the CCJs.
An explanation of this along with the case submission would help underwriters understand the customer’s rationale and make a decision accordingly, although a full 12-month mortgage history is required when applicable. In addition to our underwriting approach, we cascade both up and down which means we can offer more favourable products when Nicola’s credit score improves.
Taking a decision in principle from one of our packaging partners would provide an early answer to not only whether this case fits but at what level so Nicola’s broker can give her informed advice.
As Nicola is now purchasing in her sole name and has set up a new recruitment agency, some of the standard features we offer in our products may help her while she comes to terms with her situation.
Although borrowing is at 90% LTV, none of our products have higher lending charges – a significant saving in many cases. As recruitment is prone to the ebbs and flows of commission-based business the facility to overpay by up to 10% of the capital balance each year should provide Nicola with the opportunity (assuming she runs a profitable business) to reduce her outstanding mortgage balance more quickly without incurring an early repayment charge.