Money: Mortgage Makeover - The First Act of a property play

A specialist broker offers advice on finding a mortgage or bettering your home loan. This week: buying a first flat

The borrower:

Julia Pascal is a playwright and theatre director. At 48, she is just about to buy her first flat in north London from Camden Council. Previously she has always rented, although in 1994 she married a Frenchman who has his own apartment in France. Julia's income is low but she is getting a "massive" discount on the one-bedroomed property. The flat is worth pounds 64,000 and she is looking for a mortgage for pounds 23,750. Julia says the jargon of mortgages "horrifies and confuses" her and is concerned to keep mortgage costs down given that she is paying just pounds 50 a week in rent at present.

The advice:

Julia is self-employed with an income of around pounds 15,000 or so - a figure that can be confirmed by her accountant. This is enough for a pounds 24,000 mortgage. Some lenders would lend up to 80 per cent of the value of her property, or around pounds 50,000. But since Julia has no desire to have too much debt and does not wish to upgrade the property substantially at this stage, a loan for pounds 26,000 - which would pay for the property plus give some help with other costs - seems appropriate.

Julia is keen to pay off the debt as soon as possible and has requested a 10-year repayment-style mortgage.

Compared with endowments and the like, a repayment mortgage offers an absolute guarantee that the loan will be paid off at a known date.

Since Julia has been paying rent for a long time and is used to a steady cost for her housing, a fixed-rate loan would seem ideal. A fix would ensure she knows exactly what she will have to pay. A 10-year fix is possible but may prove relatively poor value if, as suggested in some quarters, interest rates come right down with EMU membership. So a five-year fix seems a better idea.

Using a traditional lender is a sensible move for a long-time local authority tenant making her first step into home ownership. The recommendation, therefore, is a five-year fixed rate at 6.69 per cent from the Woolwich.

On a repayment basis this equates to around pounds 305 a month. Miras tax relief is worth around pounds 20 a month, bringing the cost down to pounds 285, or around pounds 65 a week. This is just pounds 15 a week more than her current rent. But if even that increase is too much of a strain on her budget, the mortgage term could be extended to 15 or 20 years to reduce the weekly cost.

The Woolwich will charge a completion fee of pounds 350, which would normally be added to the loan, and a valuation fee on the property of pounds 165. Julia will also need to fund her own legal costs.

Overall, the idea of this recommendation is to provide a sensible and conservative package that suits a home buyer with a variable income who is looking to repay the debt as soon as possible.

q Julia Pascal was talking to Chase de Vere Mortgage Management (0171- 930 7242).

If you want to be considered for a mortgage makeover, or a wider financial makeover, for publication - including a photograph - write to Steve Lodge, personal finance editor, Independent on Sunday, 1 Canada Square, Canary Wharf, London E14 5DL, or fax: 0171-293 2096 or 2098; or e-mail: S.Lodge@independent.co.uk. Include details of your financial position, a daytime telephone number, and say why you think you need a makeover.

Start your day with The Independent, sign up for daily news emails
News
ebookA unique anthology of reporting and analysis of a crucial period of history
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Guru Careers: Pricing Analyst

£30 - 35k: Guru Careers: We are seeking a Pricing Analyst to join a leading e-...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE £45K YR1: SThree: At SThree, we like to be dif...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + competitive: SThree: Did you know? SThree is a mul...

Guru Careers: C# Project Team Lead

£55 - 65k (DOE): Guru Careers: A unique opportunity for a permanent C# Develop...

Day In a Page

Fifa corruption: The 161-page dossier that exposes the organisation's dark heart

The 161-page dossier that exposes Fifa's dark heart

How did a group of corrupt officials turn football’s governing body into what was, in essence, a criminal enterprise? Chris Green and David Connett reveal all
Mediterranean migrant crisis: 'If Europe thinks bombing boats will stop smuggling, it will not. We will defend ourselves,' says Tripoli PM

Exclusive interview with Tripoli PM Khalifa al-Ghweil

'If Europe thinks bombing boats will stop smuggling, it will not. We will defend ourselves'
Raymond Chandler's Los Angeles: How the author foretold the Californian water crisis

Raymond Chandler's Los Angeles

How the author foretold the Californian water crisis
Chinese artist who posted funny image of President Xi Jinping facing five years in prison as authorities crackdown on dissent in the arts

Art attack

Chinese artist who posted funny image of President Xi Jinping facing five years in prison
Marc Jacobs is putting Cher in the limelight as the face of his latest campaign

Cher is the new face of Marc Jacobs

Alexander Fury explains why designers are turning to august stars to front their lines
Parents of six-year-old who beat leukaemia plan to climb Ben Nevis for cancer charity

'I'm climbing Ben Nevis for my daughter'

Karen Attwood's young daughter Yasmin beat cancer. Now her family is about to take on a new challenge - scaling Ben Nevis to help other children
10 best wedding gift ideas

It's that time of year again... 10 best wedding gift ideas

Forget that fancy toaster, we've gone off-list to find memorable gifts that will last a lifetime
Paul Scholes column: With the Premier League over for another year, here are my end of season awards

Paul Scholes column

With the Premier League over for another year, here are my end of season awards
Heysel disaster 30th anniversary: Liverpool have seen too much tragedy to forget fateful day in Belgium

Liverpool have seen too much tragedy to forget Heysel

Thirty years ago, 39 fans waiting to watch a European Cup final died as a result of a fatal cocktail of circumstances. Ian Herbert looks at how a club dealt with this tragedy
Amir Khan vs Chris Algieri: Khan’s audition for Floyd Mayweather may turn into a no-win situation, says Frank Warren

Khan’s audition for Mayweather may turn into a no-win situation

The Bolton fighter could be damned if he dazzles and damned if he doesn’t against Algieri, the man last seen being decked six times by Pacquiao, says Frank Warren
Blundering Tony Blair quits as Middle East peace envoy – only Israel will miss him

Blundering Blair quits as Middle East peace envoy – only Israel will miss him

For Arabs – and for Britons who lost their loved ones in his shambolic war in Iraq – his appointment was an insult, says Robert Fisk
Fifa corruption arrests: All hail the Feds for riding to football's rescue

Fifa corruption arrests

All hail the Feds for riding to football's rescue, says Ian Herbert
Isis in Syria: The Kurdish enclave still resisting the tyranny of President Assad and militant fighters

The Kurdish enclave still resisting the tyranny of Assad and Isis

In Syrian Kurdish cantons along the Turkish border, the progressive aims of the 2011 uprising are being enacted despite the war. Patrick Cockburn returns to Amuda
How I survived Cambodia's Killing Fields: Acclaimed surgeon SreyRam Kuy celebrates her mother's determination to escape the US

How I survived Cambodia's Killing Fields

Acclaimed surgeon SreyRam Kuy celebrates her mother's determination to escape to the US
Stephen Mangan interview: From posh buffoon to pregnant dad, the actor has quite a range

How Stephen Mangan got his range

Posh buffoon, hapless writer, pregnant dad - Mangan is certainly a versatile actor