Property: HOME TRUTHS
Sunday 02 November 1997
My boyfriend and I have left university and want to buy our first home, but we don't know how much money mortgage lenders will lend us. How can we work out how much we can jointly borrow?
Miss L Rudge
You will probably need a deposit of between five and 10 per cent of the value of the home you want. Different lenders then calculate the amount they will lend in different ways, usually offering at least three times main salary plus second salary, or 2.5 times joint salary (before tax).
The amount you can borrow will be affected by the total savings you have as a deposit and the amount of long-term commitments you have; for example, any student or graduate loan repayments. You will need to discuss your circumstances with a fully trained mortgage adviser, who will be able to tell you the sum you could borrow and the most best type of mortgage.
Of course, there will be other costs - legal, surveying, moving fees - to take into account to get a full picture of the full cost of buying your first home.
Till debt us do part
I recently separated from my fiancee and we both moved out of our flat, on which we have a joint mortgage. We agreed to pay half the mortgage each until it is sold. I received a letter from our lender last week saying the account is in arrears. I have since found that my ex-partner has made no payments. She has told me she does not intend to. When I explained the position to the lender so they could chase her for her payments, I was told that I was as liable for the arrears as she is. How can this be?
Unfortunately, your lender is right. As you have a joint mortgage, the contract you entered into will have stated that both parties are jointly and severally liable for the payments. Regardless of any personal arrangements between you and you ex-partner, you are equally liable for mortgage payments and any arrears on the account.
What is an APR?
I have noticed that some mortgage adverts quote a mortgage rate and then mention a higher APR rate. Could you explain the difference between these two figures?
The APR (annual percentage rate) is the published rate for borrowing which includes all up-front fees and interest payable to give the "true" cost of borrowing. APRs are calculated according to the Consumer Credit Act 1974 and Advertising and Quotations Regulations 1989. The APR takes legal, valuation, indemnity and arrangement fees into account but does not include life assurance or endowments. It assumes that all fees are added to the mortgage even though they may be paid up front.
The APR also assumes that the initial interest rate remains constant throughout the mortgage. As fees differ for each customer and lender, APRs differ. The APR advertised is a standard example based on the lender's classification of a typical customer; these also differ between lenders.
George Wise is managing director of NatWest UK Mortgage Services.
q Send your queries on practical property issues to: Home Truths, Travel & Money, Independent on Sunday, 1 Canada Square, Canary Wharf, London E14 5DL; Fax: 0171-293 2043; e-mail: firstname.lastname@example.org
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