This week LGBT Money are here to make you a mortgage expert
BY LGBT MONEY
My partner and I are looking to get a mortgage. Is the issue of COVID-19 impacting on lenders in any way or has it made no difference at all? Are lenders uniformly looking at 20% deposits or is there flexibility? I also would like to know of any way I can safeguard myself in the event of our relationship not working out. (This is not me being unromantic).
Firstly some good news – the recent announcement on stamp duty holidays means the threshold at which you’ll have to pay stamp duty on a property has increased from £125,000 to £500,000 in England and Northern Ireland, and from £145,000 to £250,000 in Scotland and Wales, for all transactions until end March 2021. Even if you’re looking at buying a property that is above these thresholds, you will still make a saving as stamp duty will only kick in for the excess. So, if you’re buying a house in England at £525,000 you would pay £1,250 under the new rules, compared to £16,250 under the old rules.
When COVID-19 all kicked off, many lenders looked to reduce their risk and did so by requiring bigger deposits. However, as the property market has opened up again recently, with estate agents able to offer viewings and valuers being able to access properties, we have seen a couple of lenders – such as Coventry, Nationwide and Metro Bank – start offering mortgages with only a 10% deposit required. I expect as lockdown measures continue to ease we’ll see more lenders willing to offer this kind of lending.
Something that could however throw a spanner in the works is if either you or your partner have been furloughed. We have the issue of you being on only 80% of your pre-furlough income, which will impact your affordability, but lenders may go further than this too. Some will request confirmation from your employer that you will be returning to work fully on your pre-COVID-19 income which, understandably with the outlook uncertain, businesses might not be willing to guarantee.
Some lenders are requiring bigger deposits if an applicant is furloughed and these can be as high as a 35% deposit. Finally, some lenders are unwilling to look at furloughed income at all, which would seriously impact your affordability if only one household income could be taken into account. If both of you are furloughed then this could pose some serious difficulties in getting a mortgage.
However, if both of you are still working and receiving your pre-COVID-19 income then it could be a really great time to buy a property. Not just because lenders are returning to the 10% deposit arena, the stamp duty reductions and the potential for snapping up a bit of a bargain, but because interest rates are so low. With the Bank of England base rate being only 0.1% right now, there are some absolutely phenomenal deals, with many two year and five year fixed rates being under 2% interest! Of course, the rates available to you also depend on your level of deposit, with the very best deals being available to those with bigger deposits but still, now is a great time to capitalise on the very low interest rates on offer.
Turning to the second part of your question, the solicitor carrying out the property purchase for you will be able to look at different ownership models. Joint Tenants means you each own the property wholly and jointly, whilst Tenants In Common means each of you can own a specific share of the property, in line with how much deposit each party has contributed for example.
It’s important to note that legally, cohabiting couples do not have the same rights as those who are married or in a civil partnership. You may therefore want to ask your solicitor about a Cohabitation Agreement, which will set out your assets and define what happens should the relationship end. You will also want to look into drawing up Wills, to ensure that if one of you dies, your wishes regarding the property will be fulfilled, and the surviving partner is not forced to sell the property.
This is not at all unromantic, if anything ensuring both you and your partner are protected and respected in terms of rights and assets, no matter what happens, is really the ultimate in romance!
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