First-time buyer mortgage problems

Wednesday, 26th August 2009 12:22 - by Resident IFA

Less waffle here today. I have been asked by a couple of friends of mine to see if I can obtain a mortgage for them, wishing to live together for a little while before their impending marriage in 2010. Of course, life is rarely simple, one of them having a less-than-perfect (ahem!) credit history due to a messy divorce 2 or 3 years ago. This left the mortgage equation lop-sided, the remaining applicant not meeting the affordability criteria on their own, despite putting down a 10% deposit. So, the next option for me to consider is a Guarantor mortgage. A Guarantor mortgage lumbers someone else – usually a relative – with the responsibility of carrying your mortgage payments should you default. Now, this isn’t ideal for many reasons: o Will there be a relative willing to take on this potential burden? o Their mortgage and outstanding debts are taken into account, so a decent income is needed – which they may not have. o Allied to this, it is the whole mortgage that their affordability is assessed in connection with, not just half. o If they are older, the lender will take the stance that they will remain a Guarantor throughout the mortgage term. Thus, they will require proof of income in retirement if, say, they will reach 65 and retire two-thirds of the way into the mortgage term. A bit of lateral thinking led to ask me ask a few lenders if they would consider taking the potential Guarantor as a second applicant instead. To my utter surprise and amazement, they said they would, irrespective of a residential property and mortgage remaining in the background, the person clearly not going to live in the newly-mortgaged property. I am due to visit them to complete the application tomorrow evening, so I will be interested to see if this scenario works through smoothly when an application is actually submitted. What a lender’s helpline staff actually say and what an Underwriter will accept are sometimes night and day. Similar to applying for a job, such a complicated mortgage application needs a case put together for an Underwriter to make an offer. To this end, I will be grabbing every shred of supporting paper evidence, vital or not, towards putting the application over in the very best light. What else would my Clients expect from me? Come on everyone, cross your fingers and wish us well in our noble endeavour! I’ll be off now to seek a darkened room to lie down in. Until next time...