Case Studies
Brothers Allen and John are looking to buy their first property. Allen earns £25,000 and has savings of £6,000. He has been in his job for 18 months. John has recently returned from working abroad and has savings of £7,000. He has just obtained a job, paying £16,000 a year. They are on looking for a house to buy in the region of £190K - £220K. What are their options?
Solution
Allen and John are looking to borrow to the maximum. Assuming fees of £3,000 they are looking for around 95 per cent of £200,000. Any property purchase above this, limits their choice as the loan will be over 95 per cent.
Assuming that their personal finances and outgoings mean the loan is affordable and there are no loans, credit cards balances, etc, there are numerous obstacles to overcome. Many lenders will ignore John's income until he has been with his employer for three to six months. At this borrowing level, a higher lending fee is likely to apply but they can be added to the loan.
Alliance & Leicester has more generous lending calculations - 4 times joint incomes - but even so, the maximum loan available would be £164,000. Therefore, without outside assistance, they will be unable to borrow to this level.
Their options are to reduce the property price to a more realistic level - up to £170,000 - or to use one of the guarantor schemes available from a lender such as Bank of Ireland, where a willing parent assists by using his or her non-mortgaged income.
Think carefully before securing other debts against your home.
Your home may be repossessed if you do not keep up repayments on your mortgage.
The overall cost for comparison is 7.1% APR. The actual rate available will depend upon your circumstances. Ask for a personalised illustration. There may be a fee for the mortgage advice. The precise amount will depend on your circumstances, but we estimate it will be 1.5% of the loan amount with a minimum fee of £500 added on to the loan.
Mayfair Consulting Limited is an Appointed Representative of The Mortgage Times Group Limited, 279 Tottenham Court Road, London , W1T 7RJ , which is authorised and regulated by the Financial Services Authority no. 303007.
