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Gavin Richardson, CeMAP, Cert II, Head of Residential mortgages at
Mortgages for Business
www.mortgagesforbusiness.co.uk
Tel: 01732 471 613
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Question
I am in my mid-thirties and have been looking into the prospect of getting together with my friend and my brother to buy a property in order to get onto the property ladder. Between us we think we might have around 10% or possibly a bit more to put down as a deposit on a house or flat worth approximately £300,000. Do you think we will we be able to take out a mortgage together? Do lenders allow more than two people to put their names on a loan or might we need to find a specialist lender?
Answer
Yes! Many lenders allow up to four borrowers on a mortgage. In terms of loan amount, 4.75 times four incomes is how much you can expect to borrow up to 90% LTV. To find the best deal for your circumstances, I recommend using a broker who can search the whole market for you.
If you do decide to buy with friends, please take legal advice on the ownership structure – either ‘tenants in common’ or ‘joint tenants’. This is because if one of you dies, it will affect who owns the property thereafter. When a property is owned by joint tenants, the interest of the deceased owner automatically gets transferred to the remaining, surviving owners. With tenants in common, you will each own a specific share of the property and you can leave your share to whomever you choose.
Also consider what sort mortgage term you want as circumstances can and do change. It might also be worth drawing up a formal agreement to cover you for these eventualities. There is less likely to be conflict if you have thought through possible changes in circumstances and agreed in advance what actions to take should they happen.
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Question
Our mortgage is due for renewal in October but I have recently been made redundant. I am reasonably confident I can find employment again as there are lots of opportunities within my industry and I already have some interviews lined up, but I cannot guarantee I will be on the same salary I was on when we took out our current mortgage. My partner’s salary, which counts for about 40% of our repayments, will not change. How will this affect a renewal? Also, should I hold off applying for the new mortgage until I have secure employment?
Answer
If I were you, I’d wait until you have secured new employment. Even if you decide to make a simple product switch with your current lender, they will ask you if your circumstances have changed so that they can assess the case accurately. If you end up earning less, it’s likely that you won’t be able to borrow as much as before, so you may find it more convenient to stay on your current product, even though the rate has risen. When you get to this point, do get in touch so that I can work out the sums for you. This will help you to take an informed decision on your next steps.
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Question
We are looking to move from our flat to a house following the birth of twins. When we bought the flat we took out a five-year fixed-rate mortgage with a very low and competitive rate. However, we are only three years into the deal and find ourselves having to move (the arrival of twins meant we have outgrown our one-bed flat much sooner than we expected). We are worried we might not find such a great deal again. Is there any way we can transfer our current mortgage deal to our new property? We have about 60% equity in our flat, which is probably worth £295k and we are looking at homes in the £450k region.
Answer
Firstly, congratulations on the birth of your twins! Most lenders will allow you to ‘port’ the mortgage rate onto a new property which means that you won’t incur any early repayment charges. You could then get a top-up loan or further advance with the same provider. It’s worth noting that porting means transferring the rate, not the mortgage, which means that the lender will assess your affordability again. I mention this because, if one of you is on maternity leave, the lender may require an employer’s letter confirming you or your partner’s intention to return to work. They will do this to ensure that your joint income doesn’t go down – if it does you may find that you can’t borrow as much as before.
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Question
My husband and I would like to help our daughter buy her first property. We think the best way to do this would be to gift the deposit, which should be around £25,000. However, we also hoped, because her salary is currently quite low, there might be a way we could help her with the repayments too. Would we need to set up a formal arrangement to transfer money to her account, or would we need to put our names on the mortgage?
Answer
It’s perfectly normal and acceptable to lenders for parents to gift deposits to their children. If the mortgage application is made solely in your daughter’s name, the lender will assess her ability to pay the mortgage based on her income and outgoing. If you decide to go on the mortgage with her, you will also be assessed in the same way as her and be jointly responsible for making the monthly mortgage payments. I say this because, if you are nearing retiring, it could affect the term of mortgage offered if you don’t have the means to maintain the payments after you have retired. Do get in touch to talk through the options. Without further details, it’s difficult for me to accurately advise on the most suitable course of action.
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