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
Sunday 28 December 1997
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.
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.
- 1 Nigel Farage: Me vs Russell Brand on Question Time – he's got the chest hair but where are his ideas?
- 2 Harry Potter fans can apply to the Hogwarts-inspired College of Wizardry
- 3 Jessica Chambers: 19-year-old woman 'doused with lighter fluid and burned alive' in the US
- 4 Russell Brand calls Nigel Farage 'poundshop Enoch Powell' in BBC Question Time debate
- 5 Orange Wednesdays are no more
Weather bomb in pictures: Storms cuts power for tens of thousands – and snow is on the way
Jessica Chambers: 19-year-old woman 'doused with lighter fluid and burned alive' in the US
Russell Brand calls Nigel Farage 'poundshop Enoch Powell' in BBC Question Time debate
Russell Brand was rendered speechless on Question Time by this man
Fury at Airbus after it hints the super-jumbo may be mothballed
Disgruntled RBS worker writes hilarious open letter to Russell Brand after anti-capitalist publicity stunt leaves him hungry
Nigel Farage's approval rating hits 'record low' as popularity suffers in wake of Ukip sex scandal
Nigel Farage defends Kerry Smith 'ch***y' comment: 'If you are going for a Chinese, what do you say you’re going for?'
Pakistan school attack live: Taliban kill at least 132 children in 'horrifying' massacre
Sony hack: Angelina Jolie branded 'seriously out of her mind' in further embarrassing leaked email saga
Panic Saturday: 13 million Britons spend £1.2bn – while 13 million others across the country live in poverty unable to afford food
iJobs Money & Business
$200 - $350 per annum: Carlton Senior Appointments: Managing Producer Office...
$125 - $225 per annum: Carlton Senior Appointments: San Fran - Investment Advi...
Up to £70,000 per annum + benefits: Sheridan Maine: Are you a qualified accoun...
Up to £65,000 per annum + benefits: Sheridan Maine: Are you a qualified accoun...