By Pat Bunton of L&C Mortgages.
Ian wants to know about schemes to help first-time buyers get onto the property ladder. He's living with his parents at the moment and has managed to save 30,000 towards a deposit. But despite that, and a reasonable salary of around 21,000, he still can't afford even the smallest house or flat in Bucks, where he lives. He's looking at properties which cost around 150,000 - 170,000. He works in the aviation industry so doesn't qualify for any of the government's schemes to help key workers.
Clearly Ian has done fantastically well to save such a substantial deposit and it is sad that high property prices mean that the first step on the ladder for him is still not viable. Many lenders still work from income multiples so will say that they will for example lend up to 4 times your income, in Ian's case giving a mortgage of 84,000. Increasingly though lenders are starting to lend not based upon rigid income multiples, but on an affordability calculation that looks at an individual's net disposable income each month and in cases where that is high (perhaps because they have no loans, credit cards etc) going out each month then it is often possible to get more than traditional income multiples would allow.
The other avenue to explore would be whether or not mum and dad have any spare income in which case a lender may accept them as guarantors on a mortgage for Ian and in that way they could help him get on to the ladder as well. I would say it wouldn't I, but this really is a case where I would recommend that Ian seeks advice from a good broker with access to every lender in the market.
Indira from St Albans says she's heard a number of references to mortgage lenders now having to conform to FSA regulations. What are these regulations? And what rights do they give consumers?
The FSA have regulated mortgages for just over a year now and the main focus of their regulation is to ensure that all customers get transparent and timely disclosures about the service they are receiving, i.e. can the person advising them sell just one lender's products, the products of a panel of lenders, or recommend from the whole market? The rules also require that you are given a 'key facts' illustration for a mortgage product before you can apply and this is laid out in a prescribed format. In theory this makes it easier to compare two different products side-by-side. Finally, the adviser will need to be able to demonstrate suitability of advice and in the event that you feel you have been mis-sold borrowers now have recourse to the Financial Ombudsman service - all in all very good news for the consumer.
E Khoo also has a question about the impact of mortgage regulations. There are some mortgage brokers which don't charge you a fee for advice but take commission instead. The question is, will that reliance on commission bias the advice given?
There is no reason why it should impact on the advice given. For example if Nationwide have the best five year fixed rate and a broker recommends it and the mortgage completes then they will be paid a fee by Nationwide when that happens. Equally if the consumer were to go to Nationwide direct then they will get exactly the same deal. The reason that lenders pay intermediaries is simple - they chop out the costs that they would otherwise have in dealing with the customer direct, advertising to get their attention, the salary and cost of branch staff to advise etc. When they receive an application via an intermediary the first they know of it is when it lands with them. Putting it another way - if you have a straightforward mortgage that most lenders would bite your hand off for - why should you need to pay a broker a fee?
Murray from Edinburgh is thinking of buying a 'buy to let' property in Edinburgh with four members of his family, so there would be five joint owners. The idea is to rent it primarily to students. What are the pitfalls? Suggestions for the best buy to let mortgage on the market at the moment?
You can currently only have four owners of a property and mortgage lenders therefore also say a maximum of four borrowers on a mortgage. The way around this is to register the ownership of the property in four names and to set up a trust document that provides for the fact that 5 people have a beneficial interest in the property and this can be noted on the title. So the answer is yes, you can do this but you really do need to go and talk to your solicitor about it as it is not as simple as buying in five names and having a mortgage in those same names.
As for best deals - they change daily and it really there are so many variables (how much you want to borrow, fixed or variable, amount of rental income etc) - a good indication can be gained from looking in the best buy tables the national press publish in their personal finance sections.
Henry is in Colwyn Bay. Is he right that sellers now have to provide a survey for potential buyers? He has had unsatisfactory surveys in the past, e.g. dangerous wiring not pointed out. Would the seller therefore be liable if there were errors in the survey?
The government have said that from this summer they want to make Home Information Packs mandatory. Their idea is that this will include a report on the state of the property being offered for sale and whilst it is the vendor that will have to pay for this pack, it will be the surveyor undertaking the survey that will be liable for any errors in it. The final rules relating to this are still to be clarified and the point you raise is pertinent as some of the greatest concerns that need addressing are in precisely this area - i.e. where responsibilities lie for errors.
The mortgage industry has aired numerous concerns about the government's plans and is now waiting for further detail. Given the recent about-turn on residential property into SIPPs it's not even beyond possibility that this too will get scrapped.
Pauline from Southampton. Her endowment paid out 15 months ago leaving her with a 30,000 shortfall on her mortgage. She's due to retire in a year and is worried they won't be able to repay the mortgage. Her son has offered to help by aviation insurance company his own house to pay a lump sum of his parent's mortgage. Would this create any problems?
No there are no major pitfalls and if son is prepared to help then that's great. You ought to both take some legal advice to ensure that if anything happened to any of you there would be no adverse implications - talk to your solicitor about this, but it should be very simple to arrange.
Helen complained to Friends Provident about endowment mis-selling. They upheld her complaint but concluded that she was not due compensation because she'd not suffered any financial loss. That's only because, following Working Lunch's advice, since 1999, she and her husband have been overpaying their mortgage. This was partly to reduce their mortgage balance but also to build up a reserve they could dip into to fund home improvements. If they'd saved in a savings account, it wouldn't have counted against them in terms of endowment compensation. Is there anything they can do about this?
The Financial Services Authority have laid down rules on how these types of complaints are handled and I can only assume that Friends Provident have followed this when responding to your miss-selling claim. Having said that, many insurers have now been fined by the FSA for failings in their complaints processes, or for simply dragging their feet. Don't forget that if you are unhappy with Friends Provident's final response it is your right to ask for the case to be passed over to the Financial Ombusdman Service for independent arbitration.
David Waugh is thinking about buying a small two-bed flat for his son to live in during his university years. He's looking at spending between 100,000 and 150,000. Clearly his son is not earning at the moment, so David would have to fund the mortgage. There's no mortgage on their family home, which is worth around 500,000. What's the best way to set up a mortgage in their joint names? Would there be tax aviation insurance agency when the property and mortgage were transferred into the son's name after graduation?
An increasing number of parents are doing exactly this - there are a number of potential tax implications if the property is bought in the names of mum and dad. Firstly as it will not be their own main residence there may be capital gains tax to pay when the property is ultimately transferred to the son. Secondly the son may also have stamp duty to pay at the point of the transfer.
Given that the house would be held in mum and dad's names there may also be inheritance tax issues to consider here as well - so before doing anything I would suggest that the first port of call should be to an accountant or solicitor specialising in that, to ensure that ownership is structured in the most tax efficient way possible for your particular circumstances. A few hundred pounds in fees today on advice in this area may well save thousands later on.
Vaughan & Valerie Bidewell's daughter is selling her leasehold flat. The 99 year lease still has 63 years to run. Her buyer has been told by his lender that the lease must be extended before they will grant a mortgage. Why is this a problem? Are some lenders more flexible about this than others?
Different lenders have different rules on this, but in essence lenders are worried (as should a purchaser be) that if a lease is too short it may have an adverse impact on the sale price of the property in the future. As a general rule lenders want the minimum outstanding lease to be 25 to 35 years longer than the mortgage term you want, though some of the smaller lenders sometimes stipulate a full 50 years more than the mortgage term. It may be that the purchaser is trying to use this as a means of getting the asking price down, but at 63 years remaining this really shouldn't be an issue.
Jeff from Hartlepool is hoping to buy his first house within the next six months. He's looking at a 120,000 property with a deposit of 10,000. On a salary of 31,000, with no other loans, what are his options? He'd quite like a 30 year mortgage.
On the face of it this is a pretty straightforward case. The deposit is good and just about every lender in the land will be happy to lend a borrower 110,000 based upon an income of 31,000 - roughly 3.5 times income. As such Jeff should be able to shop around and have free choice from the whole market and in that sense he is in a really good position to obtain the best possible mortgage rates.
Gary from Perth. His present mortgage deal with the A&L was a two-year fixed rate which expired on the 31st January. Before re-mortgaging he asked for a redemption quote from A&L which includes a fee to release him from his contract. He want to know why he should be charged - is it reasonable? Does he have to pay it?
The unfortunate answer to this question is yes, as A&L in common with all other lenders charge an administration fee for releasing the deeds. This is standard and should have been notified to you in A&L's tariff of charges given to you when you took the mortgage out. Where such fees change (and they do periodically) you should have been sent an updated tariff of charges - if this didn't happen you could try complaining to A&L, but I'm not sure that you'll get too far.
Helen Leach is fortunate enough to be able to pay off her mortgage. She asked the Halifax is she could leave a small amount outstanding - say 125 - so that they would keep her deeds safe. But Halifax said it no longer does this. She's been told to pay 50 for them to return her deeds otherwise they will destroy them. Is this legal? What can she do?
There is no legal obligation on Halifax or anyone else to act as a deeds storage facility for customers, so ultimately, yes, they can give you this choice. Most title is now held electronically so the actual paper deeds are not of the same value as they once were, but if you want to retain the deeds then try calling your bank or solicitor as most will have secure storage facilities for these types of documents.
Richard from Bexley writes: More than two years ago, we moved our mortgage from The Woolwich to HSBC. We were given a redemption figure but The Woolwich forgot to include an outstanding amount from a second top-up mortgage. We acted in good faith throughout and made a decision to move our mortgage based on the redemption figures that The Woolwich provided us with.
HSBC paid The Woolwich; the deeds to our house and their charge were released to HSBC. A year after the transaction, The Woolwich informed us that the redemption figure did not include the second charge over our home and would we pay up. We felt they should bear responsibility for their error. Another year went by and we heard nothing until they sent us a statement showing that they were collecting nothing on a monthly basis, but that interest was accruing at a rapid rate of knots!
Do we have to pay them?
Ultimately, you borrowed the money and therefore they will argue it is not unreasonable for them to ask you to pay it back. Clearly there has been an error on both your and HSBC's part, but the fact that an error was made by both parties does not mean that HSBC will just write off the amount you borrowed. This really sounds like a rare one-off type scenario and we would expect HSBC to be falcon aviation insurance in working out a sensible repayment structure, but I really would be amazed if they just let you off completely.
Alfred from Renfrew is 69. He's got 12,000 left on his mortgage with seven years to go. His house is worth around 100,000. He has the cash to clear the mortgage - what's the best way to do it?
What a nice position to be in - all you need to do is phone the lender, ask them for a redemption statement and then when that is received to send them a cheque to clear the outstanding mortgage balance.
The opinions expressed are Pat's, not the programme's. The answers are not intended to be definitive and should be used for guidance only. Always seek professional advice for your own particular situation.
