Julie Jones is head of intermediary sales at Coventry Building Society & Godiva Mortgages
“Although affordability may be tight, the most obvious option is to find a guarantor enabling Jane to utilise someone else’s income, usually a parent. This assumes that funds cannot be raised from other means, like parents’ savings or parents releasing equity from their home.
Get the daily news delivered to your inbox
Jane may be able to get a joint mortgage with her parents, where it would not be a requirement that they live with Jane in the property. Coventry’s ‘Step Up’ facility allows first-time buyers to purchase their first property by borrowing against the combined incomes of themselves and their parents, although borrowing would be limited to no more than seven times Jane’s income.
This provides the opportunity to transfer everything into the child’s name in the future and, as a result, Jane’s potential earnings should also be considered. Another option would be a guarantor mortgage where Jane’s parents would undertake to repay the mortgage should Jane have difficulties.”
register for the next forum
Paul Fielding is from Cambria Financial
“Jane’s deposit is a little over 5 per cent of anticipated purchase price. With many lenders typically offering four to five times the admissible income, she’s likely to be able to borrow around £125,000, which could mean a purchase of £132,000. A high credit score may enhance this further.
She may have little left for costs, although she may be able to save further between application and completion.
download our news ticker
Other options could include having her parents act as guarantors or using a scheme like ‘First Start’ offered by Bristol & West/Bank of Ireland, where her parents’ disposable income could be considered.
Alternatively, a number of lenders now operate an affordability calculation and her credit score may permit her a higher loan.
The temptation to over-stretch is real. To aid affordability further on her single wage, having lived with her parents, finding a cheaper property would be helpful.”
David Hollingworth is head of communications at London & Country
“The first question is whether Jane has any other funds apart from the £7,500 earmarked for a deposit? There will be a lot more to budget for with Stamp Duty, legal and survey fees to cover and what initially looks like a decent start on a deposit can soon evaporate.
find the latest industry jobs
Even if the full amount can be used as a deposit, it only represents around a 5 per cent deposit. It will be important to avoid higher lending charges that will increase the cost of many products.
The level of borrowing does look like a big stretch, representing in excess of five times income. It is crucial to consider just how affordable the situation is. She could consider repaying the loan although that is likely to result in the need for a 100 per cent deal at a higher rate and the borrowing will be over a longer term. Either way, a fixed rate has to make sense.”
