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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
Co-buying with friends – what are the pitfalls?
My two friends and I have come up with a plan to join forces and buy a home together. We are all looking to get onto the property ladder and with deposits being so high we thought pooling our money seemed like a great idea.
I am 29 and my friends are 28 and 31. We are all female and we all have full-time jobs with joint earnings of nearly £100,000 per year. In terms of savings, we have between us £42,000 for a deposit and we are looking at buying in Croydon or Sutton (London boroughs).
We haven’t looked into mortgages yet but we would be keen to know, firstly, whether any lenders would be able to provide a mortgage for three parties. Also, are there any special considerations when taking out this kind of mortgage? The obvious concern would be what might happen if one of us were to move out. I would be grateful for some guidance and advice on anything we should consider.
Answer
Wow – this sounds like so much fun! So, it’s a really great idea with lots of benefits, but you are right to consider the possible downsides to this arrangement. There are certainly some things you would want to consider before you commit.
Firstly, you will want to agree that all money used to buy the property (both deposit and fees) will be noted in a legal document. This will prevent any questions down the line about each person’s contribution – the same should apply to any work you do to the property.
I would also encourage you to discuss how you will split bills, etc., upfront. From my own experience, it’s best to have these conversations in advance, rather than try and thrash matters out once you are in situ.
The key thing you will want to think about is if one of you wants to move out and get back any money you have put into the property. Typically, this would be done by a remortgage, where the ownership of the property and the mortgage are transferred into the names of the remaining owners.
This process has its costs, and it’s also worth adding that the remaining two people would need to be able to afford the mortgage on their own. A good piece of advice is to speak to a solicitor, who can run through all of this with you, before you decide to purchase.
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Question
What’s the best way to save for a deposit?
My partner and I would like to start saving for a deposit on our first home this year. Do you have any pointers as to the best savings account to use?
We have noticed interest rates are very good and we are toying with the idea of an account which has a fixed rate – but I notice there are penalties for withdrawing cash. What do most first-time buyers do?
Answer
There are many types of savings accounts, and unfortunately, the rates are not great on most of them, although they seem to be improving a little.
A good place to check offers is on MoneySuperMarket. I would also encourage you to look at a Help to Buy ISA, which is a government initiative – you can save up to £200 per month here, and the government will top up your savings by 25% (up to £3,000) when you buy your first home.
If you are buying with someone who also has a Help to Buy ISA, both of you will get the 25% bonus. You can pay into the ISA until November 2029 and claim the 25% bonus until November 2030.
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Question
Remortgage to a fixed rate – are there any downsides?
I took out a mortgage on a new home nearly two years ago. It was a tracker and it’s fared pretty well with low interest rates throughout the pandemic. I am due to remortgage in February and I saw the Bank of England has increased its base rate so I am considering opting for a fixed-rate.
Can you please advise me on whether this is the best option and what, if any, are the downsides of locking into a rate for two years? My brother mentioned I could fix my rate for five-years too, but I am a bit worried this might not be flexible enough, especially if I decide to move home.
Answer
I think looking at fixed rates now is a great idea – lenders have some incredibly low rates on offer, and there is a prediction of up to three Bank of England Base Rate increases this year, which will directly affect tracker rates.
You are right to consider how a five-year fixed would impact your moving ambitions. Fixed rates can be what is known as ‘portable’, meaning you can transfer them to a different property when you move and therefore avoid early repayment charges.
However, there are a couple of points to note. Firstly, it’s not a given that the lender will automatically allow you to do this – they will want to re-underwrite your mortgage to check it is still affordable.
Secondly, if you need to borrow some extra money, the rate your lender would charge is often higher than their standard mortgage rates. So you may find that, on review, a two-year option is better for you for now.
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Question
My rate has increased: What should I do?
My mortgage rate has gone from being just over 2% up to 4% and when I contacted my bank they said my rate had ended and I was now paying their standard bank rate.
I am not happy about paying this much as it’s not what I signed up for. What can I do?
Answer
OK, so the bad news is that if you check your mortgage terms and conditions, you will find that this is what you have signed up for. Mortgage rates are a bit like car insurance, in that you do need to review your arrangements from time to time.
Check if you can get a better deal elsewhere and, if so, remortgage to a new lender. There is also a strong chance that if you speak to your current lender, they will be able to offer you a new deal for staying with them. The best advice here is to speak to a broker who can look into both options for you and come back with a recommendation about your most appropriate route.
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