First Start or 3-way Joint Mortgage?

riad_2

Hi everyone,

This is going to be a long post so please bear with me! I was contacted by my estate agent today to advise me that my offer for a flat in Manchester has been accepted. I have appointed a solicitor and passed these details onto them, who have advised me that they will start the ball rolling on the process on Friday.

I understand that the next step for me now is the secure the mortgage
from a lender so I thought that I'd ask here where would be the best place to to find one.

The offer that has been accepted is at £176,000. I have a downpayment saved up of £50,000, so I am looking to borrow £126,000.

I'm in a bit of a tricky situation though... I've just graduated from university and have a secure job offer as a trainee accountant in Manchester beginning in January with a gross salary of £17,250. As this salary is on the low side, I have been told the only option for me to get a mortgage is the guarator route or perhaps a joint mortgage or a "First Start" mortgage.

FYI My mother, aged 55, has an income of £20,000. My father, aged 65, has an income of £17,000. Both incomes are from property lettings so the income is forseeable. They have no outstanding mortgages.

Initially I was looking at the guarantor mortgage route, but since I
am not currently in employment at this moment in time I understand
that is not an option for me. The other two options I have been
presented with is either a 3-way joint mortgage, where myself and both
of my parents would be named on the mortgage and the deed, or a "First
Start" mortgage from Bristol & West or Bank of Ireland.

Beginning with a 3-way joint mortgage, can you advise which
lenders would be able to arrange this type of mortgage. More
importantly, in 2-3 years time when my income increases to the point
where I will be able to take over the mortage by myself, will there be
issues regarding stamp duty and capital gains tax regarding the
removal of my parents from the mortage and the deed? (As you can imagine I need to be absolutely certain of this point).

If it is the case that there will be stamp duty and capital gains tax
issues with the above option, the other option I have heard of is the
"First Start" mortgage (where there can be a joint mortgage on a sole
named deed). Again could you advise me if either of the two lenders
who offer this type of mortgage would allow both parents to be joint
onto the mortgage in addition to myself? Or does it only allow one
parent to be on the mortgage (in which case I doubt just one of my
parents' incomes would be sufficient to borrow the desired amount).

Any options and personal recommendations would be really appreciated!!

phlash

Out of interest, who are you starting your training with, and what exams are you doing?

I don't quite understand how you think you will service such a huge debt? You can come up with all the methods to try to get the debt you want, but think about what happens once you have the debt.

Monthly costs:
Mortgage costs (Repayment - 6.08% for 25 Years): £827.63
OR Mortgage costs (Interest Only - 6.08% for 25 years) £638.40
Utilities: £100
Council Tax: £90
Food: £100
Car?: £130 (after tax, petrol, maintenance, insurance - normally higher!)
Sub-Total: £1257.63 or £1058.40

Income:
Gross: £17,250 PA which is £1437.50/month
Tax: £198.16
National Insurance: £110.46
Student Loan: £16.88
Pension? @ 5%: £71.88
Sub-Total: £1040.12

Result: Either (£217.63) or (£18.38)
(I know you must know what the brackets mean!)

Having a glance at these figures, which does not include any cash spending or money for material objects ie furniture, cutlery etc etc or allocation for medical, dental, opticians etc etc or social, for which there's alot of 'events' with the type of firm you're joining, you cannot service this debt.
Your income does not even cover the Interest Only option Mortgage, which is designed for those that have alternate means for paying off the capital loan, for which initially you'd have no alternate means, because you'd have no spare money!

I am in a similiar position to you, I start my Accountancy Training in September, but I'm on a slightly higher wage, I wouldn't consider taking on more than £80,000 of debt at this present time. Especially because in these Accountancy firms, if you fail an exam you're out, so where's your back up? I am waiting to make my job that much more secure....so pass the first few exams, before even thinking about a mortgage.

phlash;)

riad_2

I have some savings of about £13,000 which I want to fall back on for the first two to three years, and in addition my parents have said that they will pay half the mortgage payments anyways for the first couple of years (as they don't have a mortgage anyways... and considering they are giving me the £50,000 downpayment I can imagine they would be more than happy to pay half the mortgage for a while).

FYI my position is with PKF. I just don't want to rent for the first two years and waste good money.

If anyone has any suggestions on appropriate financing for my situation above it would be most appreciated!

phlash

Have you considered that buying a flat at that price might also be wasting good money.

My friend in Manchester has secured a very nice 2 bed flat for £650 per month rent - he didn't negotiate. If we compare it to your rental figure (the interest on the loan) then you are paying a similiar amount of that good money.

I've got a very nice 2 bed flat in Nottingham for £560 per month, if I wanted to buy it, it would cost me much more.

The saying that 'renting is dead money' is a myth, it can be a saving, and in your circumstances it looks like it could be a large saving. You could save if you rented.

With the housing market the way it is, I doubt you will get much house price appreciation to cover the interest on your £63,000 + legal + moving + selling etc costs, saving from renting. There's only a finite amount of people who will get lump sum deposits from their families to be able to afford current house prices.

Even if house prices don't fall in the next two years, the likelihood that your flat will have appreciated is slim, just look at the fundamentals.

Just getting you thinking.