Way for three friends to put a foot on the property ladder
Q Given the way in which mortgage lending and deposit requirements have fluctuated so dramatically over the last three years, I am struggling to afford to buy a home on my own. Two friends are in a similar position, so we wondered if we could pool our resources and buy a property in more than two names?
A There are two separate issues to consider here. In the first instance, the legal position is that several owners can be named on the title to a property, but your solicitor should advise you that the house must be held on a tenancy in common.
What this means is that, if one of you were to die while owning the house, their share would pass according to his or her estate ( ie, under the terms of a will or intestacy rules), rather than being divided automatically between the survivors.
This point is very important, as I’m sure that the last thing you want is for next of kin to be deprived of a potential inheritance.
Secondly, with regard to the financial aspect of the transaction, lenders can accept mortgages in more than one name. Generally, however, the income multiples that they use to calculate maximum borrowing will be based on two incomes only.
Some lenders are prepared to take three incomes into account, so it would be wise to shop around or recruit the services of an independent mortgage broker.
Q Will anyone take guaranteed DSS benefit into account when applying for a mortgage?
A The simple answer is that it depends on the lender. Some lenders will take certain types of benefit into account, although you should be aware that child benefit is generally not.
Q I’m looking at buying a property abroad, but don’t know where to start in order to raise the finance.
A Many foreign property estate agents have brokers that will be able to advise you on the intricacies of each individual market, as each location can differ in terms of deposit and financial requirements.
The best advice is to speak to an experienced independent broker who specialises in property transactions in foreign countries. It is worth noting, however, that bigger deposits are generally required when buying property abroad, often in the region of 20 to 25 per cent. Also, be aware of how fluctuations in the value of the euro or other currencies can affect your monthly repayments.
QI am hoping to use the equity that my house has accrued to raise some capital. However, on inquiring how much was outstanding on my existing mortgage, I have been told that I have a large redemption penalty that must be discharged. What can I do?
A Unfortunately, you will not be able to avoid paying the redemption penalty on your loan. This will have arisen because your existing mortgage will have been at a favourable rate or a scheme that offered a discount or fixed repayment. The penalty is the lender’s way of recouping some of this back from you if you choose to remortgage either before the incentive period has ended, or within a certain time thereafter.
One solution is to pay the penalty and consolidate this into a new mortgage with another lender. This could work out cheaper over the loan term than with your existing lender.
Alternatively, if you don’t want to pay the penalty, a further advance could be arranged with your existing mortgage provider at the standard variable rate. If they can’t offer you finance on that basis, then potentially a secured loan could be arranged to cover the balance. It would be wise to seek independent advice though, to make sure your overall repayments are kept in check.
Franz Muelthaler is mortgage adviser at Wakefield and Dewsbury-based property specialists Holroyd Miller, tel: 01924 465671.