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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
Lifetime ISA: How many can we open?
Can my boyfriend and I both save with separate Lifetime ISAs and combine them to purchase our first home? Or do we need to pay into the same ISA?
Answer
Hello – the good news is that you can both save separately and then combine them when you are ready to purchase your home together. So, you can each put in £4,000 year into your own ISA and the Government will add a 25% bonus to this figure up to a maximum of £1,000 per year, each. Good luck!
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Question
Can I include debt and extension costs in remortgage?
I am due to remortgage my house in February and would like some general advice. I have £10,000 of debt on my credit card, plus a £2,000 tax bill. We would also like to borrow some additional money to pay for a loft extension.
When we first purchased our house it was worth £250,000 but my neighbour’s property recently sold for £400,000 so I think the value has increased. We have substantial equity in the property.
Still, I am very worried about the debt! Will this work against us when we remortgage and will a lender allow us to include this in our remortgage? I should probably also add that when we last remortgaged I was not working and my husband was self-employed. However, we are now both employed full-time.
Answer
First of all, don’t panic! I am quite sure this can be sorted. The amount you earn is going to be key in terms of whether you can raise the amount of money you want to borrow, so I would need to know a bit more about your joint income to give you an accurate answer.
However, in terms of whether the debt will limit you, if you have used up a large percentage of your available credit lines (eg a credit card limit), it can affect your credit score although this would not, in isolation, be enough to stop you getting a mortgage.
The best advice I can give you is to speak to a broker, who will be able to review your finances and advise which lenders are best to approach, factoring in all the different elements of your finances.
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Question
What happens when my mortgage ends?
I am in the process of looking for my first property and have been doing some research into mortgage rates. There are some mortgages which last two years and five years and I am undecided between the two.
The other thing I am a bit confused about is what happens when the two or five year period ends? Will I need to find a new mortgage and will the lender remind me to do this? The whole thing seems so overwhelming but I want to go into it all with my eyes open.
Answer
Yes, it can feel incredibly daunting when you start out. I will just say that it really would be worth investing an hour of your time and meeting with a broker who can run through all of the jargon, explain how it all works and also set out the process of applying for a mortgage and buying a home – hopefully, armed with this information, you will feel less overwhelmed.
However, to answer your questions, the decision to take a two-year versus a five-year product will be driven by several things:
• Are you concerned about interest rates moving up and over what period of time?
• Do you plan to move house within the next five years? If yes, then it may be better to look at a two-year deal.
• Is there a possibility of your being able to pay the mortgage off, or a sizeable chunk of it, within the next five years? Again, this may indicate that a two-year deal is more appropriate.
However, this is just a guide and you really would be best off getting advice from a broker who can chat this all through. In terms of what happens after the two or five year period, after this initial period your rate (and your monthly payment) will change and it will almost certainly go up, to what is called the reversion rate. What this will be will depend on the mortgage you take.
It is not guaranteed that your existing mortgage lender will contact you, but they may offer you a new rate to stay with them. If choose to use a broker, they will be in touch before your rate finishes and they will look at the whole market to see if you would be financially better off remortgaging to a new provider – the same sort of principle as renewing your car insurance.
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Question
Interest-only mortgage options
I am due to remortgage in June next year and would like to move to an interest-only mortgage.
Currently, I am on a repayment mortgage, but my circumstances have changed. I have had a ‘housemate’ who has been paying me rent, but she will be moving out in the Spring.
I am worried about affordability and I think interest-only could be my only option. Do you think it would be possible? I currently pay £1,011 per month on my current deal and earn £2,400 per month after tax. My mortgage would be for £175,000, which is 50% of the current value. My friend currently pays a large chunk of the mortgage ie £650.
Answer
In terms of making your cashflow a little easier, I understand why you would want to look at interest-only. However, from a lender’s perspective, when calculating affordability they will always base their calculations on a repayment basis even if you are doing interest-only.
Looking at your income figures, I think that you should be ok to get to the £175,000 and actually, owing to the amount of equity you have in the property, I can think of several lenders who could offer you an interest-only arrangement. I hope this helps.
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