First Time Buyer Advice Sought

Lennox1987

Hi All,

I am new to this forum and have joined in the hope of receving some advice that may assist me in getting my first mortgage. The situation is as follows:

I am 25. I live in Scotland. I am trainee solicitor with a present annual salary of £16,200. I have a partner however she is a student with little to no income and so any mortgage application would by made by me only.

My current credit score is 363. This is due to me defaulting on a credit card in May 2011 (my student days). I have recently taken out a Capital one credit card and intend to use this to try and boost my credit rating.

My salary will increase to a basic £19,400 in May. I will also be given a £250 per month allowance for a car. Adding a further £3000 to my salary.

I have been looking at shared equity properties as a possible way on to the property ladder. These properties will be available in May, when my salary increases.

Based on that salary increase I have been assessed as being able to affored to purchase 60% equity in a suitable property. A 1 bedroom property valued between £130,000 and £144,000 with a 60% purchase price between £78,000 and £86,400.

The individual who carried out the assessment for these properties if also available if I wish to instruct him to try and obtain a Mortgage Promise of Loan in Principle. However, following initial discussions I am not entirely sure that is my best option. The default in May 2011 was on a HBOS Card and he suggested HBOS as the only appropriate lender, which I thought to be counter intuitive, although perhaps entirely correct. I think this may be because he is not whole of market although I didn't put this to him at the time as I wasn't aware of the concept. I suspect there may be a broker out there more suited to my needs/circumstances.

I am not restricting myself to shared equity and I am open to other opportunities.

How much I can raise for a deposit is not certain, however, I would consider £5000-£10,000 at most.

My questions/thoughts are:

Will the default in 2011 automatically preclude me from obtaining a mortgage?

Are HBOS the best lender for me?

Can I apply for a mortgage based on a projected salary?

Any advice is greatly appreciated and if any further information is required let me know.

Thanks

kingstreet

It will make life difficult, if not impossible. How much was the default and how much have you paid off?

Don't know. Is this shared equity (second charge loan to increase deposit with 100% ownership - known as LIFT scheme in Scotland) or is it shared ownership where you buy a portion of the property and pay rent, to perhaps a Housing Association, on the rest.

Some lenders will do one, but not the other.

No. A lender will want to use your salary at the time of application, so wait until it increases.

Lennox1987

kingstreet wrote: »

It will make life difficult, if not impossible. How much was the default and how much have you paid off?

Don't know. Is this shared equity (second charge loan to increase deposit with 100% ownership - known as LIFT scheme in Scotland) or is it shared ownership where you buy a portion of the property and pay rent, to perhaps a Housing Association, on the rest.

Some lenders will do one, but not the other.

No. A lender will want to use your salary at the time of application, so wait until it increases.

The default was for £500 and it was settled immediately.

Lennox1987

Lennox1987 wrote: »

The default was for £500 and it was settled immediately.

Just realised you also asked re shared equity. It is shared equity where the government own the 40% that I don't. So no rent on that 40%. It is then possible to buy the government owned percentage or part thereof in years to come.

Thanks for your help.

kingstreet

That's a popular misconception and confusion between shared equity and shared ownership.

Shared equity you actually purchase 100% of the property with a mortgage, second charge equity loan and your deposit.

http://www.scotland.gov.uk/Topics/Built-Environment/Housing/BuyingSelling/lift

What is shared equity?

Shared equity is a way to buy a home without having to fund all of it. When you buy a shared equity home from a housing association or on the open market you pay for the majority share in it and the Scottish Government pays the rest under an agreement which it enters into with you. You own the home outright, but the Scottish Government holds a security over the proportion of it has funded. When you later sell your home (or earlier if you want to increase your stake), the Government will receive the value at the time of sale of the percentage equity stake funded. If, for example, the Government funds 30 per cent of the purchase price, when the property is sold 30 per cent of the sale value of the property will be returned to the Scottish Government.

When you buy a LIFT shared equity home from a private housebuilder, you also own the home outright, but the Government and the private housebuilder will jointly fund an interest-free equity loan for you and each hold a security over the proportion of your home they have funded. When you sell your home (or earlier if you want to increase your stake), the Government and the private housebuilder will each receive the value at the time of sale of the percentage equity stake funded. If, for example, the Government and the private housebuilder each fund 15 per cent of the purchase price, when the property is sold the government and the housebuilder will each receive 15 per cent of the sales value of the property.

It's an important point of difference and this can also impact your choice of mortgage lender. Many misunderstand how each option works.

The second charge is repaid on the sale of the property based on the current value of the original percentage. You can also repay the second charge in chunks, or in full, at any time. Interest is charged on the equity loan from the beginning of year six, or year eleven, in the case of English shared equity schemes. I'm not sure if LIFT sees interest charged. You'll need to check.

Yorkie1

When do you aim to qualify as a trainee solicitor, and do you have a guaranteed position if you do qualify?

Lennox1987

Yorkie1 wrote: »

When do you aim to qualify as a trainee solicitor, and do you have a guaranteed position if you do qualify?

I qualify in May 2014. I wouldn't like to tempt fate and say I'm 'guaranteed' a job but I have as much job security as is possible in the current climate.

Lennox1987

Bump.

Thanks to those thy have replied. Any further advice would be greatly appreciated.