FIRST TIME BUYERN BUYING A FLAT IN FULHAM

THE SCENARIO

We have had an increase in applications involving joint mortgage and guaranteed mortgages. There a lot of elderly parents who are sitting on assets and they would like to help their children get onto the property ladder.

This case involved a joint application with a guarantee. This type of mortgage is not popular with most mortgage lenders.

They were buying a flat in Fulham and wanted a local Mortgage adviser.

CLIENT SCENARIO

This was complicated from the start. It involved an elderly mother looking to assist her daughter in acquiring her first home. It very quickly became known that the daughter and her husband would require a mortgage with an income multiple approaching at least 10 times. In today’s market, there was a rare chance of securing such a deal without some other assistance.

So, the scenario for this case study was as follows:-

Property value: £800,000
Nature of mortgage: Joint application/ guarantee mortgage
Deposit: £250,000
Mortgage funding: £550,000
LTV: 68%

An LTV ratio of 68% is certainly a possible target only if the underlying income can pass the affordability test. There was also the extra problem of a joint application where one of the applicants will not be on the mortgage. Indeed, due to the mothers’ age, many mortgage lenders would simply refuse.

ISSUES TO ADDRESS

Wealth: Deposit from mothers,
Income: Family income plus some of mother’s pension and investment income
Mortgage funding: £550,000
Mortgage type: Capital and interest

Help: Mortgage Adviser in Fulham
LTV rate: 68%
Joint applicant: Age of parent was an issue

THE SOLUTION

When we looked further it was obvious we would need a lender to create the right structure. We were able to find a mortgage company willing to do an application with a guarantor. There was an issue with the mother’s age but due to her investment income, it was more than enough funding to cover the shortfall.

We, therefore, created a structure which dovetailed perfectly with guarantees and mortgage affordability. The solution was as following;-

Property value: £800,000
Gift deposit from mother: £250,000
Mortgage funding: £550,000
Mortgage type: Capital and interest
Mortgage term:30 years
Mortgage affordability: Income from Mother and daughter
Guarantees/security: Mothers significant investment portfolio

We managed to arrange an array of fixed mortgage interest rate options which we’ve listed below:

2 year fixed

Interest rate: 2.64%
Early repayment charge: 2% in year 1 & 1% in year 2. None after

3 year fixed

Interest rate: 2.88%
Early repayment charge: 3% in year 1, 2% in year 2, 1% in year 3. None after

5 year fixed

Interest rate: 3.21%
Early repayment charge: 5% in year 1, 4% in year 2, 3% in year 3, 2% in year 4, 1% in year 5. None thereafter

In a normal situation, they would not have been able to afford the mortgage. However, due to the mother’s investment income, it was used to cover the shortfall.

WHAT CAN AZEMBEL DO FOR YOU?

There has been an increase in the number of mortgage applications that involved assist from parents who wont to be part of the property deeds but will only come on as a guarantee to cover any shortfall regarding mortgage payments although those over a certain age it can be difficult to find offers. Over the years we have built up some very strong relationships with lenders and private banks who have allowed us to negotiate deals that would not normally be on offer.

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