Sarah Arfaoui, is product development manager at Preferred
“Reviewing Tom’s circumstances and the amount he would like to borrow, we would consider him on our Select Unlimited range due to the number of missed mortgage repayments.
Working on our debt-to-income ratio of 43 per cent, Tom would be able to borrow enough to take out a 75 per cent loan-to-value (LTV) mortgage with a little extra to pay off any outstanding debits that he may owe. As Tom’s immediate requirement is to improve his credit profile, our one-year fixed rate could be the best option for him as it will also allow him to get back on track and review his circumstances in 12 months.
An alternative would be our choice of two-year fixed rate products, available with either a standard arrangement fee or a lower rate option with 1.50 per cent fee. Again, both options would allow Tom time to improve his credit rating and in the future apply for a lighter option.”
Alan Lakey is senior partner at Highclere Financial Services
“Tom is one of the many potential borrowers whose choice has been restricted by the recent credit volatility and the re-trenching by most of the adverse lenders. What would have been a relatively easy case to place has now become much more difficult. Strangely, many lenders market schemes as ‘unlimited’ when they actually limit the arrears of CCJs.
Having missed five payments, he is likely to fall in the heavy adverse range although, crucially, his options depend on how many payments have been missed in the last six months. Most schemes limit recent arrears which is likely to affect him.
The Mortgage Works has a two-year fix at 8.49 per cent, which carries a 1.5 per cent application fee. Amber Homeloans also has a choice of discounted rates starting at 8.50 per cent with a lower £999 fee.
In the situation that the arrears are not recent, Tom may have a wider choice.”
Mike Pendergast is IFA at Zen Financial Services
“With five missed payments, in the current market, Tom is lucky to still have his house as many lenders would instigate repossession proceedings after three missed payments.
He will find it very difficult in the current climate to get finance elsewhere – there may be a limited number of adverse lenders who may consider his case, but I would consider that, given his current lender is being so understanding, he would be best advised to approach his existing lender, who may be keen to get the arrears cleared and may therefore be willing to restructure the loan on a new property with a lower amount outstanding.
Failing that, he could approach other adverse lenders. If this fails, he could consider renting for a period and rebuilding his credit score, before looking to purchase again.”
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