Pink Home Loans has introduced a self-certification mortgage that has a 2 per cent discount in the first year.
The mortgage has a current payable rate of 4.75 per cent until October 1, 2001 but it is not available to first-time buyers. It would suit borrowers who have difficulties proving their income, including the self-employed and those on short-term contracts. Mainstream lenders are realising this problem does not mean such borrowers cannot afford a mortgage and now keen to design products for this area of the market.
Loans of up to 85 per cent of valuation are allowed, with a maximum loan of £400,000 up to 75 per cent of valuation and £500,000 between 76 and 85 per cent of valuation.
Borrowers are tied in for one year beyond the discount period, so they must pay an early redemption penalty if they pay off the mortgage before October 31. 2002. This amounts to 5 per cent of the loan in year one and 4 per cent in year two.
According to Moneyfacts on September 7, 2001, Verso offers the most competitive mortgage of this type for loans of up to 85 per cent of valuation. It has a 2.75 per cent discount until October 1, 2002, which gives a current payable rate of 4.23 per cent.
Borrowers who pay the mortgage off before October 1, 2003 must pay 5 per cent of the amount repaid, which ties borrowers in for the same period as the Pink Home Loans mortgage. But as this is a flat penalty, borrowers who pay off their mortgage in the second year pay more with Pink Home Loans than Verso.