Mortgage/Valuation issue

naefeart · 13 Jul 2010 at 17:32

If you are paying interest only, do you not need to show the bank you have a method of paying the remaining lump sum at the end of the mortgage eg. an endowment or similar?

I would also mention that if your ability to pay the mortgage hinges on a third party renting a room, that is quite a big risk to take. What if he suddenly moves out or if they is a falling out? Your mate isn't going to be able to help you out, with his 18k salary.

toshj · 13 Jul 2010 at 17:34

AtticusFinch said:
That makes a LOT more sense to me - the Guarantor as without this I couldn't understand how there was a chance in hell of getting the mortgage!

Good luck with everything

sorry - i've worded this wrong. she's his guarantor (read as: happy to bail him out shoul anything go wrong) should he hit any trouble paying his side of the mortgage, but the mortgage is being offered on the basis of his and my financial situations. does that make sense? not sure if it does! i'm confusing myself... i can't believe that someone as naive and gullable as me should be allowed to buy a property

naefeart - good point, but with the interest repayments as they are, my mate and i are capable of covering the hole amount. the additional person renting is just to lift some of the financial burden. that sid, i've never really found it difficult to attract renters so we should be able to fill his boots if he decides to jump ship!

Raumarik · 13 Jul 2010 at 17:37

toshj said:
we're going interest only as it works out at £450 per month each, which is quite affordable to be honest. the whole issue is that its an unusual property:

At the moment

With such a huge mortgage you could easily see that double if interest rates go up, which they will in the coming years. Sounds like it's been vastly overpriced by the seller, buying it at that price even if the bank do lend you the mortgage for the lower amount is going to be a long term investment for his parents, not 2-5 years.

It's unlikely you'll get a higher valuation accepted by the lender, so it's up to you to make up any shortfall.

Rotty · 13 Jul 2010 at 17:38

is it just me that finds this whole idea utterly ridiculous ?

Slam62 · 13 Jul 2010 at 17:38

now the valuation has been done you haven't got a hope in hell of getting a bigger mortgage which has probably saved your bacon anyway. You should go and give that valuer a big wet kiss.

The plan you have in place seems completely ridiculous anyway and there is no way the banks should lend you any money at all.

Danthus · 13 Jul 2010 at 17:41

Rotty said:
is it just me that finds this whole idea utterly ridiculous ?

Isn't it just a prime example of how the banks ended up in a mess?

Jokester · 13 Jul 2010 at 17:41

Rotty said:
is it just me that finds this whole idea utterly ridiculous ?

Not just you!

In the current financial climate I would be very wary of getting tied into an interest only mortgage on your home when there is so many things could go pair shaped.

Rotty · 13 Jul 2010 at 17:41

OldCoals said:
Isn't it just a prime example of how the banks ended up in a mess?

and how he is going to end up in a similar one

AtticusFinch · 13 Jul 2010 at 17:42

Be careful

toshj said:
sorry - i've worded this wrong. she's his guarantor (read as: happy to bail him out shoul anything go wrong) should he hit any trouble paying his side of the mortgage, but the mortgage is being offered on the basis of his and my financial situations. does that make sense? not sure if it does! i'm confusing myself... i can't believe that someone as naive and gullable as me should be allowed to buy a property

naefeart - good point, but with the interest repayments as they are, my mate and i are capable of covering the hole amount. the additional person renting is just to lift some of the financial burden. that sid, i've never really found it difficult to attract renters so we should be able to fill his boots if he decides to jump ship!

It is very unusual that a guarantor would provide security for only one half of a mortgage and far more likley that he and you will be joint borrowers under the mortgage. This means each of you (in law and in fact) will be responsible for paying 100% of the mortgage each month.

If either of the two of you fails to pay their bit, then the other of you must pay everything.

Normally a guarantor although being only "his" guarantor effectively takes on his reponsibilities on the event of default on the mortgage.

That's why you all need to be very clear about how this is going to work and who is resposible for what in what circumstances.

Before you sign anything up you may each (you, him and the mother) need to take separate legal advice. If you see a lawyer together the lawyer will definitely advise you all of that anyway.

Not saying this is a bad idea - just that you need to be clear on all eventualities.

Rotty · 13 Jul 2010 at 17:42

Jokester said:
Not just you!

In the current financial climate I would be very wary of getting tied into an interest only mortgage on your home when there is so many things could go pair shaped.

interest only

overpriced property

shocking loan/income ratio

it's bloody madness

Slam62 · 13 Jul 2010 at 17:42

Rotty said:
is it just me that finds this whole idea utterly ridiculous ?

no

but don't worry it will never happen anyway, not a chance.

toshj · 13 Jul 2010 at 17:42

i'm confused. based on the valuation our bank has agreed to lend to us.

as this is my first time buying, i'm totally happy to listen to suggestions/comments/abuse! however to pay £450 a month in London is surely not a bad thing? Like i said, please let me know if i'm being a total douche about all this and i'm shooting myself in the foot!

it might be wortt noting that the mortgage is fixed for 2 years, and i'm an ok financial situation.

Danthus · 13 Jul 2010 at 17:44

toshj said:
we're going interest only as it works out at £450 per month each, which is quite affordable to be honest. the whole issue is that its an unusual property:

The take home pay on £18,000 is £1200 per month, £450 a month out of that is a fair whack in my opinion!

Rotty · 13 Jul 2010 at 17:45

toshj said:
i'm confused. based on the valuation our bank has agreed to lend to us.

as this is my first time buying, i'm totally happy to listen to suggestions/comments/abuse! however to pay £450 a month in London is surely not a bad thing? Like i said, please let me know if i'm being a total douche about all this and i'm shooting myself in the foot!

it might be wortt noting that the mortgage is fixed for 2 years, and i'm an ok financial situation.

the interest rates could double and on interest only your payments will double

the government anounced today that they want to stop interest only mortgages which could need you having to find capital payments too

your income is nowhere near enough

and your ban think you are paying £65k too much

for your own sake downscale your plans to a more realistic level

toshj · 13 Jul 2010 at 17:58

Rotty said:
the interest rates could double and on interest only your payments will double

the government anounced today that they want to stop interest only mortgages which could need you having to find capital payments too

your income is nowhere near enough

and your ban think you are paying £65k too much

for your own sake downscale your plans to a more realistic level

yeah i read about the fsa's plans this morning, however i thought that when the directives came into place it wouldn't affect interest only mortgages that were already in place.

i would have thought my income should cover it ok

the bank's valuation has indeed spooked me, however when i contacted a local surveyor his stance was that the average price for the area was at £4,200 per square metre, which would actually value the property at more than we're paying for it.

anyway, it'll be interesting to see what the estate agents say tomorrow!

Rotty · 13 Jul 2010 at 18:07

toshj said:
yeah i read about the fsa's plans this morning, however i thought that when the directives came into place it wouldn't affect interest only mortgages that were already in place.

it could easily affect you if you ever needed to change mortgage deal or supplier as these are effectively new borrowing

re income it would be very possible for you payments to double over next 5 years, if you go for a fixed rate then at the end of the deal you may not be able to get another interest only mortgage at the end of the deal

toshj · 13 Jul 2010 at 18:10

Rotty said:
it could easily affect you if you ever needed to change mortgage deal or supplier as these are effectively new borrowing

that' a very good point. so if the new policy came into place, that the FSA would have the power to force someone to change from an interest only mortgage onto a capital repayment one? surely this would result in a huge amount of people defaulting on their mortgages?

Jokester · 13 Jul 2010 at 18:11

toshj said:
that' a very good point. so if the new policy came into place, that the FSA would have the power to force someone to change from an interest only mortgage onto a capital repayment one? surely this would result in a huge amount of people defaulting on their mortgages?

It would more likely mean you would be stuck with your current provider, regardless of what interest rate they were charging.

Rotty · 13 Jul 2010 at 18:11

toshj said:
that' a very good point. so if the new policy came into place, that the FSA would have the power to force someone to change from an interest only mortgage onto a capital repayment one? surely this would result in a huge amount of people defaulting on their mortgages?

no idea if that would be the case but it's something you need to find the answer to

at least you are listening to people and not mindlessly arguing your position as is often the case on here

britboy4321 · 13 Jul 2010 at 18:13

£540,000 for a flat? Must be in the centre or an SW postcode or something ..

Plan B:

Hampton is a bloody nice area and about 27 minutes from the centre by train (after a 10 minute walk).

Screw your flat, get this instead and spend 27 minutes reading the metro each day.

http://www.rightmove.co.uk/property-for-sale/property-26462407.html