(1888PressRelease)
June 25, 2008 - AMW Finance based in Blackburn has linked up with Bank of Ireland Mortgages (BIM) to introduce 1st Start, a scheme which revolutionises how first time buyers' mortgages are financed. By the parent being party to the mortgage, their income can be included and, together with a flexible approach to the parent's own mortgage commitment, the scheme can provide extra funding and a unique solution in the marketplace. Its also available to 100% loan to property value on selected products.
Parents are helping to fund the large deposits required by liquidating their investments or substantially increasing their own mortgage. They therefore need an alternative to providing this upfront cash. AMW Finance and BIM have developed the 1st Start Mortgage to provide them with this alternative.
How does the 1st Start Mortgage work?
Let's look at an example. Karen is a pensions adminstrator, aged 31 earning £20,380 per annum. She wants to purchase a property valued at £150,000. Traditionally she could borrow £91,710 (x 4.5 income multiple) leaving a deposit shortfall of £58,290 that her parents are funding.
However, with the unique 1st Start Mortgage, Karen's father's income is also included in the calculation and his annual mortgage repayment is deducted from it, just as any other credit card or loan commitment would be. This annualised mortgage repayment is calculated at a notional rate of 1.5% above Bank of England base rate (5.25% as at 07/02/08), on an interest only basis regardless of the term.
BIM's standard income multiples are applied to his remaining income and Jenny's is added. Jenny would now be able to borrow £185,800, allowing her to secure her chosen property and also look to upgrade to a better class of property if desired. Take a look at the worked example below.
New 1st Start Approach
Karen's Father's income £40,000
Less his annual mortgage repayment £ 3,240 (£48,000 mortgage X 6.75%)
Balance £36,760
4.5 x £36,760 £165,420
Plus Karen's income £20,380
Maximum advance £185,800
“Increasingly, parents are having to fund the large deposits required to help their children enter the housing market. We are excited to have found a realistic alternative with Bank of Ireland Mortgages' 1st Start scheme”, says Mike Parker, Managing Director, AMW Finance.
A range of fixed and discounted products are available on this scheme.
1st Start Product Information
Joint mortgage between the parent and first time buyer
Higher Lending Charge paid by BIM
£499 arrangement fee
Available to 100% LTV on selected products
Available for purchase only
10% overpayment facility available*
Minimum age of child: 18
Maximum age of parent: 60 at application
Open to all occupations, not just graduates
BIM's standard residential underwriting criteria applies
Choice of property ownership - joint or sole title
BIM's Mortgage Deed is written in such a way as to allow the property to be owned solely by the child or jointly by the child and the parent. The choice is for the broker and their clients to determine the appropriate option and to inform BIM of the decision. In all cases it is strongly recommended that all parties seek independent legal advice regarding the nature and practical implications of the mortgage documentation.
However, if the property to be owned is in the sole name of the child, then the parent as a condition of the Mortgage Offer, must receive independent legal advice in respect of this transaction before completion. It is possible that the same solicitor can also act on a separate basis for the parent.
*10% overpayment facility available which allows overpayments up to 10% of the balance outstanding each financial year (1st April - 31st March) without incurring any early repayment charges. The minimum overpayment is £2,000.
###
