James Cotton is a mortgage specialist at London & Country
“Ignoring the CCJ for a moment, this is a bit of a stretch for Chas and Dave, but should be achievable. With combined income of £43,000, they will need to borrow around 4.25 times this, which is beyond many lenders, but there are those that would consider it. Ultimately, their options will be determined by the circumstances of the County Court Judgement (CCJ).
If Dave’s CCJ was satisfied some time ago (i.e. more than a year or two previously), it should not cause the pair too much of a problem and they should be able get a mainstream deal. If it was more recent however, they may need to turn to a non-conforming mortgage lender.
Needing a non-conforming mortgage shouldn’t make the income stretch any more of a problem as many non-conforming lenders use affordability models. However, the size of Chas and Dave’s deposit will restrict them considerably. Their £10,000 would give them just over 5 per cent of a property worth £180,000, but they will also need to pay Stamp Duty, legal fees and survey fees.
There are currently very few non-conforming mortgage deals available above 90 per cent loan-to-value (LTV) and even fewer that don’t impose large higher lending charges (HLCs). Advantage has a near-prime two-year fix at 6.48 per cent with a £549 fee – available up to 95 per cent LTV with no HLC. This would cost them about £1,145 per month on a £170,000 repayment mortgage over 25 years.
Overall, they should see what effect Dave’s CCJ has on their options – they may decide that they can wait a bit until they are able to get a mainstream mortgage.”
James Carter is an IFA at Virtue Financial
“Chas and Dave are certainly pushing their limits but Mustn’t Grumble. Lots of lenders are relaxing their criteria towards adverse and, depending on when the CCJ was registered, may ignore this. Assuming they have sufficient for costs and are putting 5 per cent down, then a Northern Rock two-year fixed at 5.19 per cent would fit, with a medium credit score. I understand they are Snooker Loopy and require a third room for their pool table and That Old Piano. I think they need to Stop Dreaming of a £200,000 purchase and look towards the lower end of their scale; perhaps in Margate? They may even be fine with a 100 per cent deal. This would leave them with cash for home improvements and an emergency fund. As always, when friends are buying a property together, they should take into account a future change in situation. If one, for instance, pledges In Sickness And In Health (I Wonder In Whose Arms?), this could have an impact on their purchasing power.”
Alan Lakey is a senior partner at Highclere Financial Services
“Chas and Dave are looking to borrow beyond what the majority of lenders would consider prudent. Clearly there may be issues of affordability here as well as the viability of obtaining finance.
Apart from Royal Bank of Scotland, no lender will consider a 100 per cent loan due to affordability and the CCJ issue. If we look at the lower figure of £180,000, we see a requirement for a 5 per cent deposit of £9,000, which, with the usual purchase fees of at least £3,300, takes them beyond the £10,000 they have saved.
This suggests that they should be looking at properties in the £150,000 range, which presents a 5 per cent deposit, and with the application fee added allows the fees to be met. If properties are not available at this price range they should wait and save a larger deposit.
I would be considering the Chelsea Building Society which currently offers 5.24 per cent fixed for two years or 5.29 per cent fixed for three years, and will ignore the modest CCJ. As Chas and Dave are first-time buyers (FTBs), I believe a fixed rate is appropriate as it will shield them from likely rate rises. With a combined net monthly income of £2,757, a loan of £142,500 costing £875 per month represents 32 per cent of income and appears to be affordable.
While they do not ‘need’ life assurance I would suggest they each arrange critical illness protection incorporating life cover and, if appropriate, income protection policies.
