By taking a 100 per cent deal on a repayment basis, first-time buyers can begin to repay modest amounts of capital almost immediately. Choosing a deal that allows over payments to be made without penalty can also accelerate the amount of capital that’s repaid.
A good 100 per cent mortgage can offer a viable solution for some, although borrowers should try to avoid the mortgage indemnity premium (MIG). If you have no, or only a small sum to put down, a lender may charge you this premium in order to cover himself in case you’re unable to keep up the repayments. On a 100 percent mortgage, MIG usually works out as an additional cost of about three per cent of the amount borrowed, increasing the overall borrowing to 103 per cent. It could be cheaper to find a loan that does not require this.
If you’re buying a property with a friend or partner, there are a number of issues to consider and steps to be taken to protect your investment before signing on the dotted line:
* Draw up a deed of trust with a power of sale. This means sale of the property can’t be blocked by one party if you fall out or the person disappears without a trace.
* Decide whether you’ll be joint tenants (the property is then owned 50:50 and passes automatically to one if the other person dies) or tenants in common (each owns a different share, so the person bringing in the larger salary can take a bigger share of any gains – and losses).
* Make wills. If one co-owner dies without having made a will (intestate), the remaining person will have no rights over that person’s share of the property.
* Put both names on the deeds. And if a new housing arrangement is set up by the individuals after one already owns the property, the lender has to be informed.
If you and your partner aren’t married and decide to buy a house together, it’s important to realise there’s no such thing as a common law wife or husband (except in some extremely obscure exceptions). In the absence of any other legal agreements, if you’re not married the law sees you as two distinct individuals with no call on each other’s money. That means if the utility bills are in your name, you’re ultimately responsible for paying them. And if you pay into a savings account in your partner’s name, the money’s legally theirs.
The solution is to draw up a living together agreement. Find out more at the Advice Now website.
For day-to-day concerns, such as paying utility bills, sit down and talk it through. If one of you earns more than the other, for example, will that person pay a larger proportion or will you split the bills 50:50, with the richer one paying for more of the treats?
It’s a good idea to open a joint current account, but it’s important you both agree what the money is to be spent on. Spending the money on an expensive box of Belgian chocolates instead of paying a gas bill is sure to start a row.
Finally, take time to read all the small print. Always ensure you know what you’re buying and check dates for when any discount or fixed rate runs out. And be particularly careful to check for penalties for paying your mortgage off early, moving to another provider before the tie-in period expires, or for missing a payment.