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95% purchase – failed credit score

95% purchase – failed credit score

We are seeking opinions on how useful this new product would be to your clients and plan to release it first to Promise’s registered brokers.

If you have any comments please let us know – sorry but we doubt we will be able to respond to all the comments; but we are grateful for any feedback nonetheless.

We are involved in the design and launch of this alternative to the government Help to Buy scheme – with some important differences:

  • It can be used to purchase Pre-owned property (not just New Build) – that really opens up the market massively
  • Unlike other high LTV lending there is no credit score so we expect to accommodate cases with credit glitches / events
  • It is available to second / third time buyers who want to move up market
  • It is interest bearing from day one at 5.5% above base
  • It is an unsecured interest only loan

Borrowers still need a 5% deposit and it is a shared equity scheme like the government scheme but we think the market for this could be significant.
However, what do you think?

A few questions:

  • Do you think there is much demand from your clients for this type of product?
  • Do you have any reasonable suggestions to tweak / improve the product?
  • We plan to launch with a small panel of around 4 first charge lenders who will work closely with us – who would you like to see included? – They will need to be capable of taking this product on board quickly so the high street lenders are not really an option.

The product is aimed at clients buying pre-owned homes who have a good or excellent credit history have no CCJ’s or defaults over £300 in the last 2 years. Their rent / mortgage reference should be clean for 2 years and overall the application should also be acceptable to the first mortgage lender which might be lending at 75% LTV – plenty of specialist lenders accept this credit profile. There is no credit score so common sense underwriting decisions can be made.

There should be 2 years job stability and good income – including self employed. That said if a first charge lender caps the income multiples for its own lending, this loan may still fit the affordability calculation based on income and outgoings.

This is a peer to peer loan – unsecured but with a notice at land registry to ensure the loan is repaid on sale.
It may interest your BTL clients as an alternative form of investment – they can choose the property and clients they want to invest in, how much to invest, and expect a 5% plus base annual return plus an uplift in their investment equal to the increase in property value. Given this would be an owner occupied property, it should be well maintained and the investor shares in any increase in the property value created by the homeowners improvements.

Benefits over traditional BTL investing:

  • No stamp duty
  • No need to set up a limited company
  • No mortgage required – invest what you can
  • No agency fees
  • No solicitors – we deal with them for you
  • No refurbishment costs
  • No empty lets
  • No tenants trashing the property – the occupier will love the house more than you will
  • No repairs, renewals or liability
  • 5% annual return
  • Greater capital growth due to homeowner improvements and maintenance
  • 100% share of the increase in the value of your investment – if the property doubles in value so does your investment
  • These are the basic bones of the product with final tweaks happening now.

We will keep you updated and in a controlled launch plan to give you first access to the product.

In the meantime any feedback is helpful.

www.promisemoney.co.uk

01902 585052


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    Notes...


    More than 50% of borrowers receive offers better than our representative examples. The %APR rate you will be offered is dependent on your personal circumstances.
    Mortgages and Remortgages secured on land
    Borrow £270,000 over 300 months at 7.1% APRC representative at a fixed rate of 4.79% for 60 months at £1,539.39 per month and thereafter 240 instalments of £2050.55 at 8.49% or the lender’s current variable rate at the time. The total charge for credit is £317807.66 which includes £2,500 advice / processing fees and £125 application fee. Total repayable £587,807.66
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    Promise Money is a broker not a lender. Therefore we offer lenders representing the whole of market for mortgages, secured loans, bridging finance, commercial mortgages and development finance. These loans are secured on property and subject to the borrowers status.

    More than 50% of borrowers receive offers better than our representative examples

    The %APR rate you will be offered is dependent on your personal circumstances.

    Mortgages and Remortgages

    Representative example

    Borrow £270,000 over 300 months at 7.1% APRC representative at a fixed rate of 4.79% for 60 months at £1,539.39 per month and thereafter 240 instalments of £2050.55 at 8.49% or the lender’s current variable rate at the time. The total charge for credit is £317,807.66 which includes £2,500 advice / processing fees and £125 application fee. Total repayable £587,807.66

    Secured / Second Charge Loans

    Representative example

    Borrow £62,000 over 180 months at 9.9% APRC representative at a fixed rate of 7.85% for 60 months at £622.09 per month and thereafter 120 instalments of £667.54 at 9.49% or the lender’s current variable rate at the time. The total charge for credit is £55,730.20 which includes £2,660 advice / processing fees and £125 application fee. Total repayable £117,730.20

    Unsecured Loans

    Representative example

    Annual Interest Rate (fixed) is 49.7% p.a. with a Representative 49.7% APR, based on borrowing £5,000 and repaying this over 36 monthly repayments. Monthly repayment is £243.57 with a total amount repayable of £8,768.52 which includes the total interest repayable of £3,768.52.


    THINK CAREFULLY BEFORE SECURING OTHER DEBTS AGAINST YOUR HOME

    REPAYING YOUR DEBTS OVER A LONGER PERIOD CAN REDUCE YOUR PAYMENTS BUT COULD INCREASE THE TOTAL INTEREST YOU PAY. YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON A MORTGAGE OR ANY OTHER DEBT SECURED ON IT.


    Promise Money is a trading style of Promise Solutions Ltd – Company number 04822774
    Promise Solutions, Fullard House, Neachells Lane, Wolverhampton, WV11 3QG

    Authorised and regulated by the Financial Conduct Authority – Number 681423
    The Financial Conduct Authority does not regulate some forms of commercial / buy-to-let mortgages

    Website www.promisemoney.co.uk