Mortgage advice gratefully received...

CycleFiend

Hi,

I'm wondering if anybody can help me with a bit of advice for a mortgage.

I'm looking to buy a house for £250k. I have a £90k deposit, so I'm looking to borrow £160k at 64% LTV over 35 years, costing between 700-800 pounds depending on interest rates.

I earn £25,716, or about £1400 p/m. On paper I understand that I cannot afford the mortgage, but there are a few other factors:
• I have a ready lodger who is willing to contribute £350 p/m rent and half bills, which obviously cannot be counted for mortgage purposes.
• I am a teacher who tutors twice a week giving me about an extra £200p/m, though this is cash and can't be proven.
•My pay will incrementally increase over the next five years as follows: year 1 £27,243, year 2 £28,794, year 3 £30,465, £32,394, £34,200. (Hopefully I'll get a percentage pay rise at some point, too, though I ain't holdin' my breath!!)
So, roughly speaking my monthly income would be approx. £1950 and I'd be paying out around £750. This means that my mortgage spending as a percentage of income would be 38% of net income or 28% of gross, which seems to fall within most guidelines. So I think it seems affordable.

Obviously I won't secure a £160k mortgage on my salary, and this is where I could do with a bit of guidance. My brother says he's more than happy to help me however he can. He has a mortgage already of £114k on a property valued at £180k. He earns £37k salary. Is he able to act as guarantor on the mortgage? He should be able to borrow about £165000 on his salary, and so has about £50000 additional borrowing potential. I'm just wondering if it would be possible for him to assist me? If anyone is able to help with the following I'd be really grateful:
1. Would he be able to act as guarantor? (I'm guessing not as the affordability of both mortgages would be out of his potential.)
2. Is it possible for him to be a limited liability guarantor? I can borrow up to about £120k, so can he guarantor the extra £40k only?? If so, does anybody know who does such mortgages?
3. If not through guarantor, can we maybe do it so that we take out a joint mortgage. I'm not sure if this would work if he already has a mortgage?
4. Is there any way of using his house as collateral against another house?
5. My dad is 62, and earns a little less than me, though owns his house outright (value approx. £140-150k). He'd be willing to secure the loan against his house, but I wouldn't want him to release any equity or lose any ownership to do so. Again, is it possible to do anything here which might help secure the loan?

I think they seemed like the most likely scenarios to me, but any other suggestions would be most welcome. I recognise that people might just think I'm being over-ambitious. However, I'm 27 now and would rather buy somewhere that I can live for the forseeable future with room to grow than have to sell and buy again in five years time. That seems like a whole load of extra expense and hassle that could be avoided by getting it right just now.

Many thanks guys,

Sam

Thrugelmir

I doubt any lender would agree to any of your scenarios as a basis of a mortgage offer.

Buy something you can afford based on your own income. Build from there.

kerri_dfw

Why don't you declare the £200/week instead of dodging tax

Dave_Ham

You really need formal advice, although likely you and Brother joint mortgage has the most scope.

Has to be conducted appropriately with a lender that allows this, so all above board.

ViolaLass

CycleFiend wrote: »

I earn £25,716, or about £1400 p/m.

You sure? I earn about that per year but take home more than that per month (and I'm a teacher too).

CycleFiend wrote: »

• I am a teacher who tutors twice a week giving me about an extra £200p/m, though this is cash and can't be proven.

Declare it to the tax man and it will then be official and can be counted.

CycleFiend wrote: »

•My pay will incrementally increase over the next five years as follows: year 1 £27,243, year 2 £28,794, year 3 £30,465, £32,394, £34,200. (Hopefully I'll get a percentage pay rise at some point, too, though I ain't holdin' my breath!!)

I'm not convinced PRP is on top of the old incremental pay rises, it's instead of, isn't it? I.e. your pay may not go up at all over the next few years or by a very different amount. You can't count on those rises.

CycleFiend wrote: »

I recognise that people might just think I'm being over-ambitious. However, I'm 27 now and would rather buy somewhere that I can live for the forseeable future with room to grow than have to sell and buy again in five years time. That seems like a whole load of extra expense and hassle that could be avoided by getting it right just now.

Yes, I think you're reaching beyond your means. Five years is a long time and it's not implausible that you might want to move at some point - new job, partner, get married, change careers etc. I wouldn't get caught up in having your first house be your forever home.