Andrew Frankish is managing director of Mortgage Talk
“In order to afford even the cheaper property, Ginger needs to clear an income multiple of 5.4 times her salary, as well as requiring a 100 per cent mortgage. This reduces the field of lenders from which to choose and, realistically, puts the more expensive flat out of her reach.
Northern Rock remains a strong financial institution from a borrower’s perspective, and I’d recommend its ‘Together’ product as Ginger’s best option. Provided her credit score was sufficient, she could potentially take out a five-year fixed rate mortgage for the required amount.
The product has two parts: a 95 per cent secured loan, plus 5 per cent of unsecured lending. This means Ginger could borrow enough to pay off her credit card bill, keep all her borrowing in one place, and reduce her overall liability. However, she would have to be aware that the credit card debt would be spread over a longer period of time, and hence she would be paying more overall interest.”
Clive Kornitzer is chief operating officer at Abbey for Intermediaries
“In the first instance, Ginger should be looking to resolve her outstanding debt. She may find it cheaper and easier if she was to consolidate her outstanding credit card debt into either a low rate loan or an interest free balance transfer card.
Without any savings to use as a deposit, Ginger should look at mortgages that offer a 100 per cent loan-to-value or over. However, this still may not be enough to buy the flat she wants and she may have to revisit her plans to take part in a shared ownership.
While shared mortgages can be a good solution for some, we would advise people not to enter into an agreement lightly. A shared mortgage needs more consideration because all the people named on a mortgage are jointly liable. Instead, Ginger might want to consider looking into finding a guarantor. This might offer a hybrid option that will give her access to a larger mortgage without the risk of shared ownership.”
Paul Fielding is from Cambria Financial
“Ginger is typical of many first-time buyers and, despite her good level of income, she is hindered by the lack of deposit. With no savings and a regular monthly credit card commitment to take into account, her residual income would still need an income multiple of around 5.8 if she were looking to borrow £197,000 on a 100 per cent scheme.
On affordability, she may qualify for 100 per cent with BM Solutions or Cheltenham & Gloucester, depending on her other outgoings. However, even then, she may find it difficult to fund a monthly repayment of around £1,240 per month.
If she really has to buy, either a scheme where a family member could help with a deposit or a suitable shared ownership scheme may be her best option for the future. This would allow her to review this in three to five years’ time, when she may have more equity in the property and a better income.”
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