Is the recent turmoil in the mortgage market weighing heavily on your mind? Do you have questions about mortgages that are left unanswered? Reach out to us via email, and we’ll connect you with one of our knowledgeable experts. Below, Nick Mendes, mortgage technical manager at John Charcol, responds to a reader’s inquiry. If you have a question for our specialists, please email us at [email protected].
Question:
I’m a first-time buyer finding it challenging to secure a mortgage on my own due to my income limitations. I’ve come across the term “income booster mortgages” but am not entirely clear on how they function. Could you clarify what they are, how they can assist me, and any potential risks I should consider?
Answer:
For many first-time buyers, the issue of affordability is a significant barrier to entering the housing market. As house prices continue to escalate and lending standards become increasingly stringent, finding a mortgage that suits your income can feel daunting.
Income booster mortgages are a solution designed to help individuals like you by allowing family members or friends to contribute their earnings to your mortgage application. This collaboration can enhance your overall borrowing capacity, increasing the funds available to you.
These types of mortgages work by incorporating a supporting applicant’s income alongside your own, thereby improving your affordability profile in the eyes of lenders. The primary benefit here is that you could potentially borrow more than what you would qualify for solely based on your income, allowing you to access a broader selection of properties or expedite your journey to homeownership.
Several lenders, including Generation Home and Skipton Building Society, offer options where multiple applicants can support a single borrower. Notably, in many cases, these supporters are not required to appear on the property deeds. This setup allows them to assist you in qualifying for a larger loan while keeping the legal ownership of the home entirely in your name.
Different lenders have unique eligibility requirements. For instance, Generation Home permits up to six individuals to be listed on a mortgage application, whereas Skipton allows four. Remarkably, these supporting applicants do not necessarily have to be related to you. Additionally, Barclays’ Mortgage Boost enables friends or relatives to support your mortgage application without being on the title deeds, ensuring their income is factored in while maintaining sole ownership in your name. Nationwide also offers an appealing option with its Helping Hand mortgage, which allows borrowing of up to six times your income on a fixed-rate mortgage for five or ten years, provided you meet their minimum earnings criteria.
In addition to enhancing affordability, income booster mortgages provide a degree of flexibility. Some lenders facilitate the removal of supporters from the mortgage later on, should the primary borrower’s financial situation improve. This makes these mortgages a practical short-term strategy for those anticipating an increase in their earnings in the near future.
For those who prefer to increase their borrowing capacity without adding another applicant, certain lenders are now offering higher income multiples for extended fixed-term mortgages. For example, Perenna and April Mortgages allow borrowing of up to six times a buyer’s income when committing to a longer fixed-rate arrangement. They also provide flexibility, with early repayment charges lifting after five years, permitting buyers to switch lenders if their circumstances change.
However, it’s crucial to weigh some important considerations before proceeding. Supporting borrowers are equally responsible for the mortgage, meaning that if the primary borrower defaults on payments, the co-signer is also liable. Many lenders mandate independent legal advice to ensure that all parties involved fully grasp their responsibilities. Moreover, the financial commitment of being a supporter may impact their own borrowing capacity, as their involvement in your mortgage could influence their ability to secure loans or credit in the future.
If you are contemplating an income booster mortgage or exploring other lending options to overcome financial hurdles, consulting with a mortgage broker is highly recommended. They can assess your individual circumstances and direct you toward the most suitable solutions. Given the evolving landscape of the property market and the introduction of innovative lending products, now is an excellent opportunity for first-time buyers to explore ways to maximize their borrowing potential and take the first step onto the property ladder.
