£40k saving on £499k Adverse Credit Mortgage for First time buyer with low deposit

For many of those with previous life events that have caused financial difficulty, it can feel like obtaining a mortgage is either a huge uphill task or is just not feasible.

 

Combined with lenders who consider these types of clientele often being manual lenders which gives the benefit of flexibility but sometimes comes at a cost of speed it can sometimes mean these people lose out on deals that were within reach.

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The Scenario

 

Our client - a private life manager of an influential CEO of a worldwide service based company and their partner - personal nanny for the CEO's children. Had found a property they fell in love with after months of searching. 

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Having approached a previous firm they were told that there was no possible chance of obtaining a 5% deposit mortgage. they were quoted for a 10% deposit for a 420,000 mortgage which was lower than what they needed. This was also on a 7.2% interest rate for a 5 year fixed rate and also a 2,000 broker fee to arrange this.

 

At a 5% deposit, adverse credit can be very challenging to have lenders allow. This one had its challenges.

4 defaults from 4y ago all settled in the last 2.5y
Missed payments from a similar time period
Large amount of borrowing for the loan to value

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The Solution

After an appealed decision at the Decision in principle stage due to the recent great credit conduct, we had this decline overturned and were presented with not only a larger affordability of 499,000 at 5% deposit but also a 5.3% interest rate. Nearly 2% lower than their previous quote!

This took the equivalent payment on a 7.2% mortgage for £499,000 from £3,258p/m to £2,614p/m. That's £644p/m or £15,456 in 2y, excluding the extra £1,500 broker fee in savings.

This was also now on a 2y fix which gives the ability to remortgage onto a more mainstream lender once the previous adverse will have fallen off the credit report in this time period.

There will be a clean credit file available and should be able to apply with all high street lenders in the short term instead of being stuck on the high rate for 5y costing an extra £23,184 over the 3 extra years of being fixed in for initial 5y fix on the higher rate.

Total savings - £40,135 over 5y.

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