Type: Discounted-rate mortgage
Discounted term: Two years
Payable rate: 6.24%
Minimum loan: 25,001
Maximum loan: Up to 130% of valuation subject to a maximum of 300,000
Income multiples: Up to 3.75 times principal income plus second or 2.75 times joint
Conditions: Maximum loan over property value is 30% subject to a maximum of 30,000
Flexible features: Overpayments, underpayments, payment holidays, lump sum withdrawals available through Choices facility, interest calculated daily
Arrangement fee: 449
Redemption fee: 5% of amount repaid in first two years
Introducers fee: Refer to lender
Tel: 0500 050020
The max 130 deal has a 0.31 per cent discount over two years and allows for loans up to 130 per cent of valuation.
London & Country mortgage specialist James Cotton points out that it is designed for first time buyers struggling to get on the housing ladder and those looking to consolidate other debt.
Comparing the rate with standard schemes, Cotton feels max 130 is high but not surprising due to the risk the lender is taking. He says: “The discount is just 0.31 per cent, giving a current rate of 6.24 per cent. There are early repayment charges for the first two years and there is the option to make overpayments.”
Cotton says there is no denying the problems first time buyers face but feels much of their struggle is due to the cost of houses, following steep price rises, compared to their income. He says: “The ability to borrow more than the value of the property will not solve the affordability problem or help these borrowers get a mortgage.”
Discussing the drawbacks of this deal, Cotton says: “It may help those who can afford the level of borrowing but have no deposit, or may reduce the outgoings of those with other unsecured debt, but the risks are considerable.
“As all borrowing is secured against the property, those borrowing more than 100 per cent of the property value will put themselves into negative equity from day one. This is a fairly risky move at any time, and with house prices are cooling or showing a fall in some areas, borrowers could find themselves with little room to manoeuvre.” He warns that selling the property or remortgaging could be difficult unless there is a considerable rise in the propertys value.
Cotton thinks it is difficult to make direct comparisons between this and other deals because there are none around that offer this level of secured borrowing. He cites Coventry and Northern Rock as lenders who offer up to 125 per cent of valuation, but only 95 per cent is secured, while the rest is made up of a personal loan.
Suitability to market: Poor
Competitiveness of mortgage rate: Poor
Adviser remuneration: Average