Quick mortgage offer for first-time buyer and first-time landlord

We were approached by a project manager working in the construction industry who was looking to get on the property ladder by purchasing a 2-bed flat in a converted terrace house in South East London for £331,000, using a deposit gifted to him by his father.

The flat was already tenanted and generating a rent of £1,550 pcm, and was being sold by probate as the owner had died.

The number of lenders that will consider applicants who are first-time buyers and first time landlords is limited so we approached a high street bank that is well-known for this type of transaction. In these cases, the bank calculates affordability as though the applicant were applying for a homebuyer mortgage rather than using a rental stress test.

Unfortunately for our client, his salary was insufficient. However, the client reliably informed us that he was due a substantial pay rise (£10k), so we asked his employer to confirm this in writing.

Having received the necessary confirmation, we submitted an application to the lender requesting a fast turnaround time as required by the probate situation. A valuation was booked and when the report came back, it suggested that the property was worth £375,000 – a whopping £44,000 more than the purchase price.

Whilst this was good news for our client, the bank was only willing to lend against the purchase price of £331,000 but did produce the formal mortgage offer within 17 days.

Here are the details of the deal:

Property price: £331,000

Loan amount:  £248,250

LTV: 75%

Rate: 2.50% 2 year tracker

Term: 25years capital & interest

Mortgage payment:  £519.00 pcm

Lender arrangement fee: £995 added to the loan

Rent: £1,550 pcm

Gross yield: 5.6% pa

Consultant: Gavin Richardson, 01732 471613



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