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Our property investment expert is Jeni Browne, Sales Director at
Mortgages for Business
www.mortgagesforbusiness.co.uk/
Tel: 0345 345 6788
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Question
Purchasing a rental property
We would like to seek your advice on the possibility of our daughter buying the property she currently rents.
She is 50 next February, earns £15,600 per annum as a care worker and lives with her two daughters, aged 24 and 22. Her partner died in 2017.
She rents rooms in a four-bedroom semi-detached property. It was previously in her partner’s name – she took it over and pays £400 per month rent. The two daughters are still studying and can only work part-time.
When her partner died her ex-husband rented a room to help with the rent. He has since suffered a stroke, can only work part-time now but is on Universal Credit, which helps. He also pays £400 per month rent.
The property has been valued at around £315,000 to £320,000 by a local estate agent. Given the various schemes that are available, how likely is it that she could actually purchase the property, e.g. by stating her income plus rent from her “lodger” as further income?
We gather Help to Buy only covers new properties, and other schemes only cover buying rented council properties. But what possible “deposit” versus “mortgage” options are there?
Answer
There are a few options that you can look at, although I’m afraid this is likely to be difficult to achieve, if there is not a significant deposit to support her level of income. That being said, I can suggest a few routes to look at…
Some lenders may look at your daughter’s income including the rent from the lodger, under the ‘rent a room’ scheme. But you will need to find a lender who would lend with the lodger in situ upon purchase. An experienced mortgage broker can assist you with which lenders would consider this.
Another option is that you could look at adding your granddaughters to the mortgage, via either a family mortgage or on a joint borrower sole proprietor arrangement.
This would allow their income to be considered but they would not be owners of the property. However, as they are studying they may not have the income to support in this way. It may be also worth looking to see if there is another party who could support the application though.
My last suggestion is it may be worth your daughter considering a new build which will open up the Help to Buy scheme. I would recommend speaking with a mortgage broker who can look at the level of deposit in conjunction with the lodger income and give you a clearer view of what may be possible.
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Question
When do I start making repayments on my mortgage?
I am about to buy my first property and have been approved for a mortgage.I am now just waiting for the solicitor to complete the paperwork.I wondered when the first repayment for the mortgage will come out of my bank account? Will it be on the day I move in or will it happen just before or after? What’s the normal procedure?
Answer
It would be very unusual for your mortgage payment to be taken on the day of completion. When your payment will first be taken will hinge on the date of completion and the date of the direct debit, so my best advice is to speak to the lender just before completion and ask them for confirmation.
In addition to this, many lenders, once you have completed, will send you a letter confirming these details. Good luck with your move!
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Question
Should I bother with cashback?
We are about to move house and have been looking at the various mortgages available to us.We wondered whether there was any point in opting for a mortgage with cashback.It looks like a bit of a no-brainer, but then would we end up paying more in fees, charges or interests?
Answer
When looking at your mortgage options, it’s really important to look at all the costs as well as the benefits. It may be that the cashback means that your interest rate is higher, and so will cost you money over the longer term.
However, it may also be that this extra lump of cash helps you out with your move. There is no right or wrong answer here, as everyone’s needs and priorities are different, so just make sure you do all your research so that you are making an informed decision which is right for you.
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Question
How much can I borrow?
My partner and I are hoping to get onto the property ladder next year. We hear that, as a rule of thumb, we can only borrow four-and-a-half times our salaries.
Is this true? Are there any other income requirements which will be taken into account?I only ask as I have an annual bonus which changes every year and my partner is self-employed so we are worried it might not be entirely straightforward to use this calculation.
Answer
In short yes, 4.5 times income is a good rule of thumb. But what is actually classed as income?! Most lenders will use your salary plus 50% of annual bonus.
For your partner, it will usually be the average of his last two years’ taxable income. There are variations on this so the best advice is to speak to a broker who will be able to work this through with you and let you know the art of the possible!
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