Wealth Check: 'We want to take the leap into the property market'

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Hannah Dowding and Andrew Browne have been together for five years and want to buy a property together. Both are living at home, but Ms Dowding's parents are retiring from Essex to Suffolk, too far for Ms Dowding to commute into central London.

Hannah Dowding and Andrew Browne have been together for five years and want to buy a property together. Both are living at home, but Ms Dowding's parents are retiring from Essex to Suffolk, too far for Ms Dowding to commute into central London.

The young couple have steady jobs and want to make the "giant leap into the property market" and be self-sufficient. They have been saving over the last few years, and Ms Dowding's parents have also put some money aside for the purchase.

Ms Dowding, an HR executive, and Mr Browne, an auditor, want to know their mortgage options, as well as the best savings, investment and pension arrangements.

Anna Bowes at Chase de Vere, Darius McDermott at Chelsea Financial Services and Vivienne Starkey at Equal Partners looked at their case.

HANNAH DOWDING, 24, AND ANDREW BROWNE, 24

Debt: Ms Dowding student loan £2,500

Salary: Ms Dowding £22,000; Mr Browne £24,000

Savings: Ms Dowding £150 a month in ISA;

Mr Browne £150 a month, £5,000 in other savings.

Outgoings: Ms Dowding commuting £157; food £250; student loan £100; car and other costs £250. Mr Browne commuting £150; food £200; car and other outgoings £400 to £500.

MORTGAGE

Ms Bowes calculates that based on the deposit Mr Browne and Ms Dowding have saved, plus the contribution from Ms Dowding's parents, they will be able to find a property for around £139,000 based on standard income multiples. With a deposit of about 10 per cent, this gives them access to some quite competitive mortgage rates. Moneyextra Mortgages gives the example of a two-year discounted rate from the Woolwich, costing 4.54 per cent or £706 a month.

An alternative would be to approach a lender that offers higher than usual income multiples. Some banks will go as high as four times joint salary, but this would mean significantly higher monthly payments, as well as higher property purchase costs.

Ms Starkey says that as Mr Browne is a part-qualified chartered accountant, he is eligible for a professionals mortgage from a lender such as Accord or Scottish Widows. These will grant 100 per cent of the property price, without the need to pay a mortgage indemnity premium.

Ms Starkey suggests that the couple should buy their home as tenants in common, as this makes matters easier, in the unfortunate event that their relationship does not work out.

SAVINGS

The priority for Ms Dowding and Mr Browne is to save as much as they can now to build up as large as possible a deposit for their new home. They are fortunate that they have very little debt. Mr McDermott says that although the couple are using their annual Isa allowances, they could do better. Newcastle Building Society pays 5.85 per cent, fixed, and Lambeth offers 5.40 per cent, although both are long-term accounts.

The couple should also make sure that the further £5,000 they have saved works as hard as possible. Chelsea Building Society pays 5.25 per cent for an account with 30 days' notice.

Ms Starkey points out that ING Direct offers 4.75 per cent on its savings account, although as this is not an Isa tax will be taken off the interest. However, the account is suitable for setting up a cash reserve; Ms Starkey stresses that this is important, in case the couple face any unexpected bills.

PENSIONS

Ms Starkey says they can keep their pension contributions low now, in order to build up a cash reserve and see how much they can afford later. However, the longer they delay the more expensive it will be. Ms Starkey suggests Legal & General and Norwich Union as companies with competitive charges and a good range of investment funds.

Ms Bowes says stakeholder pensions remain a cost-effective way to save for retirement, and as the couple have 40 years to go, they can afford to put money into equities. Mr Browne should really be consider starting a pension.

INVESTMENTS

Mr McDermott says that the couple could look to put £3,000 into stocks and shares Isas, once they have used up their cash Isa allowances. They will, though, need to take a 10 year view, even if they invest in low to medium risk funds, such as Liontrust First Income or Invesco Perpetual Corporate Bond. However, equities have historically outperformed cash over the long term.

Ms Bowes says that investments can provide a useful medium to long-term way to save, but unlike pensions, the money is still accessible before retirement. Unit trusts and open-ended investment companies (OEICS) spread the investment risk, but the couple should take financial advice at that stage.

* If you would like a financial check-up, write to Wealth Check, 'The Independent', 191 Marsh Wall, London E14 9RS, or e-mail cash@independent.co.uk. You must be willing to be photographed.

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