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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
Buy Now Pay Later: How will it impact my mortgage application?
I wonder if you could settle an argument, please? I am saving for a mortgage deposit and have been putting money aside since the start of the year.
As we approached Christmas I noticed I was struggling to save as much. As such, I have been using the credit cards and Buy Now Pay Later schemes to spread the cost a bit.
My mum said the BNPL schemes will show up my on my credit report and negatively impact my mortgage application. But, surely, if I pay them back they will just provide evidence of me being able to pay bills on time?
Thanks in advance!
Answer
Ah, now this is a tricky one to answer, as each lender will view debt (even if it’s historic and paid off in a timely fashion) differently from each other.
Some would say that it’s great you have borrowed and paid back; others would be worried that you borrowed because you were spending more than you could afford, which could indicate a worrying trend in spending patterns.
It’s great to have a credit card where you put a small amount of money on each month and then clear it – lenders are fine with this, and it helps build your credit score. But borrowing larger sums (for things like furniture and cars) could be where you find lenders views begin to split.
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Question
Would I be eligible for shared ownership?
I would like some advice please on the criteria for being a shared ownership customer. I am a 24-year-old woman and I live in London where I am currently renting a shared house and paying £750 a month plus my share of bills.
I earn £25,000 a year and I have my student loan plus credit card debt of £5,000. I have recently inherited £10,000 from my great granny, which I hope to put down as a deposit on my own house.
I have realised, if I want to stay in London, that £10,000 is not enough to put down as a deposit on a flat and someone mentioned shared ownership. I am confused about whether I am eligible and how much I can buy as my ‘share’ of the home. Also, do all houses qualify for shared ownership, or only specific properties?
I would love some help and guidance. Thanks so much.
Answer
Shared ownership is only available on specific properties. The great news is that as you are purchasing only part of the property, which can really open up opportunities to get onto the property ladder for those on lower incomes and/or have smaller deposits.
Let’s say you found a one-bed apartment worth £300,000. You could then purchase a 25% share at £75,000, which looks affordable based on your income and deposit.
When looking at properties, keep in mind the rent you will need to pay on the remaining share (in this case, the other 75% of the property), plus any additional costs such as ground rent and service charges. A good mortgage broker will run through your budget with you. Good luck!
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Question
Mortgage anxiety – I don’t know where to start
This is quite a strange question – so please bear with me! In a nutshell, I am really worried about taking out a mortgage! I have saved enough to money to buy my first house – well, put down a deposit on my first house – and now I am ready to start house hunting and looking for a mortgage.
But I just don’t know where to start or what to do? I am 40 (don’t ask?!) and my parents are no longer around, but were renters anyhow, and therefore I have no one to ask for advice. I have a couple of friends who are homeowners but I am too embarrassed to ask them for help in case I mess up.
Do I find a mortgage first, and then a house? How do I even find the best mortgage – there seem to be thousands and I can’t distinguish between who offers them and who advises on them? Shall I just go straight to my bank (I’m with Barclays)?
Please help a bewildered person take a big step!
Answer
Well, the good news is that by saving up your deposit, you have now done the hard bit, so well done!
The best advice I can give here is to find yourself a good mortgage broker (look for high Trustpilot reviews as a guide). They will be able to take you through how the application process works, explain the different mortgage products and let you know how much you can borrow so that you are viewing only properties which you can actually buy.
I would do this before you launch into viewing properties, as this will put you in a more informed position and give you greater confidence.
By all means, speak to your bank too, but they may not be able to offer the lowest rates or best deal, whereas a broker will be able to consider the whole mortgage market and thus ensure you get the best rates.
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Question
Buying a house: What can I afford?
I would value some guidance please on how to pinpoint the price bracket I should be searching within for my first home. I hoping to get onto the property ladder in the next year or so but I am not sure really sure how much I can afford.
I am 32 and buying alone and I have £7,500 saved up so far. I earn £38,000 per year and I don’t have any debt at all, although I do use a credit card, which I pay off monthly.
I am hoping to buy in the Nottingham area and would like a two-bed house. However, I am unable to refine my search as I don’t know how much I would be allowed to borrow on the mortgage. I am hoping to have saved up £15,000 by the time I come to buy but would be happy to wait a bit longer and save more if necessary.
Answer
As a rough guide, lenders will lend up to 4.5x your income which, for you, would mean being able to borrow £171,000.
This amount will vary between the lenders, as they work on affordability calculations, so some could offer a bit less than this, and some a little more, but this is roughly where you should be able to get to.
However, you also need to keep in mind that while a few will go to 95%, most lenders will cap their lending at 90% of the purchase price, so you may need to save up a bit more, depending on how much the property costs.
It’s also advisable to not clear your savings out entirely, but to have some money left to cover you if you hit a tricky patch or have a large unforeseen expense. You also need to be aware of your legal costs, possible survey fees, etc. A mortgage broker will be able to cost these out for you.
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