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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
First-time buyer nerves
I have been saving for a deposit now for some time and have nearly £100,000. I have a good job, no dependants, no debt and a good credit history. I have been told I am a good prospect for a mortgage. The only thing holding me back is my nerves! I am concerned about the housing market, and whether now is a good time to buy. But I am also worried I will make a mistake and my house will go down in value. The whole thing just feels quite daunting. Is this normal and how should I proceed from here?
Answer
I think that when anyone is about to do something new, or indeed invest £100,000 of their money, it is both natural and to be expected that they will feel some element of nervousness.
In terms of whether the house will go down in value, it’s hard to know what house prices are going to do over the near term. What I will say is that if you plan on owning a home during your lifetime, you will experience increases and reductions in value during this time. I appreciate that you don’t want to buy something and then have 10% wiped off the valued within a couple of months, but it is always really important to view any property acquisition as a long-term investment and any price reductions you experience, will (as history has proven) over time, recover and go back into the black in time.
In terms of what do next, it sounds like you are not in any great rush, so perhaps just take a look around, and if something comes along which you love, go for it. And if you want to use a mortgage broker, get in touch and we’ll be happy to hold your hand!
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Question
Mortgage in retirement
I am 87 years old and would like to sell my flat and move into a newly-built retirement home. The new flat costs £450,000 but I would need to get a mortgage for around £30,000 in order to cover all costs. I am relatively healthy and have a decent pension income which would easily cover the monthly payments. Would I be able to get a mortgage at my age on a retirement home for £30,000?
Answer
Traditional mortgage lenders don’t like to lend on retirement homes, as they have a limited resale market, however, it may be that a lender who specialises in later life lending could assist you with this. If you go to the Equity Release Council, they will be able to give you the name of an independent adviser in your area who can help.
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Question
Saving for a deposit
Can you please recommend the best scheme for getting onto the housing ladder? I have been looking at the Help to Buy: Equity Loan but I am a bit worried about paying it back after five years. Would a Lifetime ISA work better for me? I currently have £1,000 in savings (I have only just started) and I have made a New Year’s resolution to put 25% of my salary – £400 – aside each month to start building a deposit. Ideally I want to get some interest on this. Thank you.
Answer
Well done on making a good resolution! Hopefully, you stick at yours better than I have with mine 🙂 You are referring to two very different types of scheme here. The Lifetime ISA limits you to £4,000 per year of investment, but you will get the 25% contribution from the Government. So this is a really great, tax efficient way, to build up a deposit over time.
The Help to Buy: Equity Loan, is a loan from the Government which acts as a deposit in the absence of you having sufficient deposit funds from your own sources. I agree that the concern over being able to repay the loan after five years is a valid one, however, the loan is not called in, but instead after this time you would start to pay interest on it.
So I think that the question is really whether you want to buy something now (Help to Buy: Equity Loan) or whether you would prefer to save up your deposit and make the step further down the line. We see clients using both options and they are both really great initiatives to help first-time buyers get on the property ladder.
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Question
Money for an extension
My partner and I would like to extend our property to provide a ‘granny annexe’ for his mum who is going to help us out with childcare when I go back to work after maternity leave. We have heard we could get an extension on our mortgage – a second charge mortgage – which can help us to finance this. Do you recommend these products and what are the pros and cons? For your information, we have about 40% equity in our three-bed house which is worth approximately £325k. We are currently three years into a five-year fixed rate mortgage. My mother-in-law is renting out her property so we cannot use any of the money from a sale.
Answer
A second charge mortgage is a perfectly good way to finance this – indeed, one of the main reasons people take a second charge is to fund home improvements. The pros are that it allows you to raise money without disrupting your current mortgage arrangements. The cons are that they can be expensive and also, if you take a loan with early repayment charges, this will not necessarily fit around your current mortgage rate, so when one deal ends, the other might not.
I would encourage you to speak to your current mortgage lender in the first instance and see whether they will give you a further advance (a top-up mortgage) as this will probably be more cost effective. It will also mean that all of the borrowing is in one place so negotiating a new rate in two years’ time will be less complex. If you would like us to talk to your lender for you, do get in touch.
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