We were approached by a broker who was trying to find a lender that would accept an applicant with no buy to let experience and who had a poor credit record - a CCJ (settled in 2014) and missed payments.
The broker had tried a mainstream lender that accepts first time landlords but without success because the client’s credit score was too low.
The client owns his own home almost outright and, for the last 20 years, a butchers which provides him with an income just shy of £25k.
He was looking to borrow £277,500 to buy a three-bed terraced house in Greater London, valued at £370,000.
We identified a three-year term product from the Keystone Solutions Range which caters for borrowers with adverse credit and accepts first-time landlords.
Because of the greater perceived risk-factor, the rate is higher than those offered by the mainstream lenders but will help the client to improve his credit rating over time as long as he doesn’t encounter further difficulties.
At the end of the three years, the client may well be in a better position to refinance onto a more competitive rate from a mainstream lender.
When making the initial assessment, Keystone identified that the rental income was not sufficient to meet the stress test calculation or the monthly mortgage payment on a loan at 75% LTV, so the client’s income from his business was used as a top-up.
Here are the details of the deal:
Property value: £370,000
Loan amount: £277,500 including facility fee
Term: 3 years interest only
Mortgage payment: £1,848 pcm
Lender facility fee: 3% (£8,325) added to loan
Rental income: £1,800 pcm
Gross yield: 6% pa