Paul Silcock is national intermediary account manager at Halifax Intermediaries
“Providing there are no undeclared financial commitments, borrowing a sum of between £150,000 and £200,000 should not be a problem for Donner and Blitzen.
Buying with friends is a good way of getting on the property ladder. It is, however, important to consider your decision very carefully. A change in personal circumstances could cause complications, so we would normally advise people who are looking to buy with friends to opt for a short-term product of two to five years and to seek legal advice.
Donner is on a lower income than Blitzen. Therefore, assuming the payments will be split 50/50, a fixed rate mortgage may be advisable to assist with Donner’s budgeting.
Buying at the lower end of their budget seems the more sensible option as could mean that they benefit from more competitive products with lower loan-to-values (LTV). They would be able to choose from Halifax’s entire first-time buyer product range.”
Mike Simmonds is a consultant at Savills Private Finance
“The first thing the girls need to decide is their attitude to risk. As they are getting on the property ladder for the first time, a fixed rate could suit them better than a variable rate mortgage.
With their deposit and income they have the opportunity to purchase up to £200,000. If this was the case, they would be utilising a LTV of up to 95 per cent. Royal Bank of Scotland offers a two-year fix at 5.80 per cent, with a £999 fee. This is more cost-effective than the lower rate products. If purchasing at £150,000 or below, they have enough deposit to gain access to products up to 90 per cent LTV. This means that the Abbey tops the list with 5.69 per cent for two years with a £999 fee.
If the clients are happy to take on the risk of a variable rate, then the Co-op is the most cost-effective at both 90 per cent and 95 per cent LTV. It has a 5.49 per cent Base Rate tracker with £999 fee.”
The girls should also make provision for the extra costs involved when purchasing a house, such as stamp duty. If you are stretching yourself, the last thing you want is a forgotten charge stopping your purchase.
Richard Morea is technical manager at London & Country
“Donner and Blitzen have a number of issues to consider and chief among them is the purchase price as this will influence the choice of lender. At the top of their price range, their deposit will be under 10 per cent, which, if it can’t be increased, will make those lenders without a higher lending charge (HLC) above 90 per cent more favourable. The purchase price will also be an influence as the income multiple required could be as much as 3.85 times their joint income. This, coupled with the HLC, could narrow their options.
As they are buying together out of necessity, they need to consider how long they are likely to be happy with this arrangement. They should speak to their lawyer regarding an agreement to determine what will happen when the property is sold, and discuss their options surrounding ownership.”
