First Time Buyer Joint Mortgage

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First Time Buyer Joint Mortgage

Steven Hargreaves talks us through joint mortgages for First Time Buyers.

 

Who is classed as a First Time Buyer?

It’s someone who hasn’t owned a property before – they’ve never bought a property or inherited one.

How do joint mortgages work for First Time Buyers?

As an example, if you didn’t own your own house and I didn’t own my own house, we are First Time Buyers, the lender will look at our joint incomes and work out how much we could borrow together. We would then put in a similar deposit each and purchase the property together.

Because you’re a First Time Buyer, some lenders will give you additional discounts that aren’t available to home movers or people who are remortgaging. There can be certain benefits for First Time Buyers that other people don’t get.

My partner is a First Time Buyer, but I’m not – what are my options?

Some lenders would still allow you to get a First Time Buyers discount or package.

Where it does fall down is stamp duty. The majority of First Time Buyers would not pay stamp duty. There are certain limits which I won’t go through at this stage, but stamp duty is simply a tax on buying a property. First Time Buyers in the main don’t pay that tax unless the property value is over a certain amount.

But you can only ever be a First Time Buyer once. So if you had owned your property and sold it a few years ago and we were now buying together, unfortunately because you’ve had a property before you would have to pay stamp duty – because you only get that benefit once.

Do both buyers have to be First Time Buyers? Do couples lose First Time Buyer status if one partner bought in the past?

Exactly that. Yes. If I’m a First Time Buyer and you’ve already owned a property unfortunately, neither of us get the benefit with the stamp duty.

We can still get a First Time Buyers discount from a lender, but we certainly don’t get stamp duty for free. For there to be no stamp duty, both of us need to be First Time Buyers, so neither of us has owned a property.

What does being joint tenants or tenants in common mean?

This is how the property is actually held. So if you and I were married, we would most likely buy the property as joint tenants. Joint tenants means that if I were to die, my share of that property would go to you because it’s jointly owned.

If it’s tenants in common, the property is in effect split up. If there are two of us, I own 50% and you own 50%. The tenants in common might just be friends buying a property, using both our incomes to buy more expensive property.

If we bought as tenants in common and I died, my 50% of the house would go to my next of kin rather than you. Equally, if you died your 50% of the property would go to your next of kin rather than to me.

Can I get a joint mortgage with a guarantor?

You certainly can. It’s a bit of an old fashioned term these days. Previously when you used a guarantor, it meant that if you couldn’t afford your mortgage, the guarantor would step in and pay.

These days it tends to be called Joint Borrower Sole Proprietor rather than guarantor. It means that the person helping you out goes on the mortgage, but not on the property deeds.

If there are any missed payments, it is the responsibility of the person who bought the house and also the guarantor to make sure that mortgage is paid. But that guarantor is not on the deeds, for stamp duty reasons. A number of lenders offer this kind of mortgage and we recorded another podcast on Joint Borrower Sole Proprietor and in certain cases it is fantastic and works like a dream.

I did one a while ago where the applicant was on a fast track with their income but couldn’t get the property they needed. We did a Joint Borrower Sole Proprietor and within two years their income had increased dramatically. They were then in a position where they could get rid of the Joint Borrower Sole Proprietor and have the mortgage on their own – but it got them into the house they needed in the right area for their employment.

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How much can you borrow as a First Time Buyer with a joint mortgage? How much deposit do I need?

The minimum deposit is 5% but in every case, the larger the deposit you put down, the lower the interest rate you can get. From the lender’s perspective there’s less risk when you put down more deposit.

If you can put a 5% deposit down, we can get you a mortgage. At 10% it would be a cheaper interest rate, and cheaper again at 15% or 25%. But it gets to the point where you can’t afford to save that amount of money because you want to buy a house.

How much you can borrow is specific to each person or couple. We would look at your income, liabilities and outgoings and then using specific calculators we would work out exactly how much you can borrow. Some lenders will give you a higher loan than others, but it’s all specific to the clients.

Can you transfer a joint mortgage to one person?

Yes, you can, but under certain circumstances. If you and I had bought a property together and we were going our separate ways, to keep the house I would need to have enough income to support that mortgage on my own. If that’s the case, it’s quite easy to do. We can do it by remortgaging with another lender or, in some cases, we can do it with your existing lender.

How do you calculate a First Time Buyer joint mortgage?

We would speak to both applicants and get details of their income, their assets and liabilities – such as any loans or credit cards. The affordability would be based on their total income and expenditure, and is specific to that couple.

How can a mortgage broker help me get a joint mortgage as a First Time Buyer?

The difference can be enormous. I spoke to some clients earlier this week and they were looking at a £210,000 house. He’s on quite a fast track with his income and his earnings will go up very quickly – so they wanted to buy a more expensive property.

One lender would actually lend them £270,000 rather than £210,000. They’d been to three separate lenders who all said the maximum was £210,000, but we got them £60,000 more.

It can be a similar situation with payments. One lender will have a certain interest rate and another might be 0.5% lower. You’re very lucky if you walk into a bank or building society and find the cheapest lender available.

That’s what a mortgage broker does. A good broker will look at all the different banks and building societies, assess your affordability and work out which will be the cheapest lender and can lend you the money you need.

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