First-time buyer Madeleine moved back in with her parents to save £30,000 for a down payment on her dream home – but she still hasn’t been able to climb the property ladder because of her income
The first step up the real estate ladder is never easy – especially when you’re buying on your own.
First-time buyer Madeleine, 28, had moved back in with her parents to save £30,000 for a down payment on her dream home.
But even though she had a good deposit at the bank, she still had trouble getting a mortgage. Lenders will usually let you borrow about four times your salary.
That means if you’re shopping alone, you can borrow a lot less than someone buying a pair, taking both salaries into account.
Usually when you buy solo you need to have a higher salary to make up for not being able to borrow more.
As an assistant psychologist working for the NHS on a salary of £26,365, Madeleine was priced out by the south-east London property market.
Programs to help first-time buyers climb the ladder
The young professional also didn’t want to start renting or sharing because she has a dog and it would be harder to save.
To ease her rise, Madeleine used an income-boosting mortgage to secure her first home.
Also known as a Joint Borrower Sole Proprietor (JBSP), this is a way to add a family member’s income to your mortgage to increase borrowing.
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You don’t own the property but you have to help with the repayment if needed.
Madeline was able to use her father David’s income to increase her affordability from £115,000 to £319,000.
This meant she was eligible for a £255,000 mortgage with Tembo and was able to buy her £285,000 two-bedroom flat in Croydon.
“I would have lived at home for at least five more years if I hadn’t gotten a mortgage,” she said.
“I didn’t want to rent because it wasn’t right for me and I would have lost the deposit I’ve worked so hard to earn over the years.”
But what are the pros and cons of an income enhancement mortgage and how do they work? We explain …
Mortgages explained to increase income
With an income-augmentation mortgage, the lender takes into account the income of another person — such as a family member or close friend — when calculating your mortgage affordability.
This effectively means buyers can qualify for a larger mortgage – which could be good for single people who don’t have a large security deposit.
Unlike a surety mortgage, parents don’t have to use their savings or property as surety.
It also allows the buyer to receive first-time buyer relief from stamp duty, so they don’t have to pay the surcharge they would have to pay if they were buying from homeowners.
However, one of the biggest disadvantages of an income-boosting mortgage is that everyone is jointly liable for paying the mortgage.
“When payments are missed, it affects everyone’s creditworthiness,” said Sarah Coles, senior personal finance analyst at Hargreaves Lansdown.
“Those who help but are not named in the deeds must also understand that they will not receive anything in return.
“Anyone who chooses to help a family member needs to understand what they are getting themselves into.”
There are some limitations that can also complicate it.
For example, some lenders have an upper age limit, so parents who will be in their 70s or 80s at the end of the mortgage term may not be able to help.
“If you choose this option, it’s a good idea to agree in advance when it will end and the owner will start paying the mortgage themselves,” Ms Coles said.
“Otherwise you may have completely different ideas about how long this regulation will last.”
Finally, there are also only a limited number of providers offering these mortgages, so they are likely to be more expensive.
You should also be aware that borrowing a larger amount of money means your repayments will be large each month, so always make sure you can afford your mortgage.
https://www.mirror.co.uk/money/i-saved-30000-first-home-26803676 "I saved £30,000 for my first home but still couldn't get up the property ladder"