Case study 1: First Time Buyer
Meet John, a 28-year-old working professional who has just landed his dream job in Bedford. He has been renting a flat for the past five years and is ready to step on the property ladder. John has saved £25,000 and has a good credit score. He is looking for a mortgage to purchase a two-bedroom flat in Bedford, which is priced at £198,000.
First Time Buyer Mortgage:
As a first-time buyer, John can take out a 5-year fixed-rate mortgage at a rate of 4.43% with a deposit of £25,000. This means he will need to borrow £173,000.
With a term of 25 years, John will have to pay £948.54 per month for the next 25 years, bringing the total repayment to £284,562. However, after deducting the deposit, John will only need to pay £259,562 for the property.
Case Study 2: Remortgage
Meet Sarah, a 35-year-old mother of two who purchased a three-bedroom semi-detached house in Bristol five years ago. Her mortgage term is coming to an end, and she is looking to remortgage her property to get a new deal.
Remortgage:
Sarah has a remaining mortgage balance of £120,000, and the current interest rates are higher than they were five years ago. So, she is looking for a new deal that remains affordable. Sarah was on a 2.6% interest rate but after shopping around the most suitable deal she can find has come out at 5.8% interest. This is quite a significant jump. Sarah decides to speak to a mortgage adviser who is able to access the whole market to see if they can help find something more suitable. the adviser finds her a new deal at 5.14%.
Sarah’s repayments were £642 a month when she was on a 2.6% interest rate. The 5.8% interest rate Sarah has found would mean repayments of £846 a month, which Sarah has expressed to her adviser is unaffordable. Despite the adviser finding a rate of 5.14% it still means Sarah would be looking at £801 a month. The adviser and Sarah discuss her needs and agree a term extension from 20 years to 25 years would be the most suitable option. The adviser secures the deal and £711 a month repayment which despite being an increase for Sarah, remains affordable.
Case Study 3: Buy-to-Let
Meet James, a 42-year-old property investor who owns three rental properties in Manchester. He is looking to purchase a fourth property to expand his portfolio.
Buy-to-Let Mortgage:
James is looking to purchase a two-bedroom flat in the city centre for £200,000. He plans to rent it out for £1,000 per month, generating an annual income of £12,000.
After consulting with a mortgage adviser, James decides to take out a buy-to-let mortgage with a 25% deposit. He chooses a five-year fixed-rate mortgage at 5.8% interest, which means he will have to pay £713.22 per month for the next five years. After five years, James plans to sell the property, and the anticipated sale price is £240,000.
With his rental income and anticipated capital gain, James expects to make a profit of £58,732 over five years.
Are any of these you? Or someone you love? We can help you to find the most suitable deal for your needs and explore the market to help you secure a rate that’s right for you.
Risk warning: Your home or property may be repossessed if you do not keep up repayments on your mortgage. You may be charged a fee for mortgage advice.
