Barry spends six months of the year away from home, working on an oil rig, and earns £35,000 a year. Garry is a trainee chef on £16,000 a year. Garry has one satisfied CCJ of £250, which is a year old, and has student debts totalling £12,000.
What are their options?
David Hollingworth is a mortgage specialist at london & Country
“More and more first-time buyers are looking to club together in order to boost their buying power and help them afford their first step onto the ladder. There can be health warnings for friends looking to follow this route, as there is always a risk that the friendship may break down, or one friend has very different future plans to the other. Hopefully, as brothers they are confident they can make this work and in fact it should suit both parties well. Garry will benefit by being able to buy a home that would normally be simply beyond his reach and Barry gets into the market with the advantage of having a trusted co-owner resident when he is away on the rig.
In terms of the joint income, the brothers should be in the right ball park. In fact Barry’s higher income would support the majority of the mortgage required. Garry is carrying a fairly substantial student debt and the monthly payments on this will impact on the amount they can borrow. He should think about how he will repay this debt having taken on the responsibility of mortgage payments as well.
The fly in the ointment for the brothers could be the CCJ that Garry incurred. However, this is satisfied, although we don’t know when, and is for a small amount so I would not give up on a lender accepting this credit blip on mainstream rates, particularly if there is a good reason. Lenders such as Abbey, Accord, Bristol & West among others can show some flexibility around a minor blip in credit. However, this is going to be a high loan-to-value (LTV) case and that may turn some lenders off as well as raising the issue of higher lending charges.
They should also take some legal advice on the ownership of the property and may want to structure it as tenants in common, considering the larger input that Barry will make in both deposit and monthly payments.”
Tony Catt is a Hove-based sole broker
“This case is a little complicated. The borrowing proposition involves a little bit of adverse credit and high income multiples and credit that will reduce borrowing ability. Fortunately, the CCJ is relatively small and the student loan will involve a fairly small monthly payment. So Garry and Barry should be able to proceed with the property purchase at £160,000 to £180,000. While they could perhaps go a little higher than this, I feel that they should work towards buying at the lower end of this range, as it will be more likely to be acceptable to a prospective mortgage lender.
They have sufficient savings to pay the costs of purchase and also provide for a 5 per cent deposit. They could get 100 per cent borrowing, although according to Mortgage 2000, there is only one lender able to work with them at this level. At 95 per cent, there is a greater choice of lenders and schemes and the costs are significantly reduced. The higher lending fee comes down from £3,960 to £2,970. I think it is worth putting in the £9,000 to reduce the fees and this also gets a better rate and is therefore better in the long-term.
Based on a capital and interest repayment mortgage scheduled over 25 years, their mortgage payments will cost them around £970 to £1,050 per month.”
Alan Lakey is a partner at Highclere Financial Services
“Joint incomes of £51,000 imply a requirement for between three and 3.35 times joint incomes. By restricting their search to the lower end of the scale they will increase the numbers of potential lenders, which should also mean a lower product interest rate.
Garry’s student loan should not be a problem for most lenders but the CCJ will remove a number of potential lenders from the page.
A purchase price of £160,000 will mean fees of around £3,000 so a loan of £151,000 would be required. Borrowing £152,000 (95 per cent) would enable £1,000 to be retained as an emergency fund.
Nationwide Building Society may look favourably as it can accept a CCJ up to £250 and the income fits. It is currently offering 4.88 per cent fixed for two years, which would seem a sensible method of keeping outgoings low and fixed so as to avoid short-term Base Rate rises. Also, as joint mortgages with siblings tend to be short-term, this will allow changes at the end of the two-year loan period.
The monthly cost of a 25-year repayment mortgage would be £876, which appears easily affordable to the brothers. In fact, Nationwide Building Society’s affordability calculator suggests that a loan of £171,000 on a property of £180,000 would also fit.”
