Berkeley Consultants and Bank of Ireland Mortgages launch mortgage scheme to help First Time Buyers onto property ladder

Berkeley Consultants, based in Chiswick, has linked up with Bank of Ireland Mortgages (BIM) to launch 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.

On average first time buyers are borrowing 77%* of a property’s value and parents are helping to fund the large deposits required. In order to do so, parents are liquidating their investments or substantially increasing their own mortgages. They therefore need an alternative to providing upfront cash. Berkeley Consultants and Bank of Ireland Mortgages 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. Jenny Smith is an accounts clerk, aged 22 earning £20,000 per annum. She wants to purchase a property valued at £120,000. Traditionally she could borrow £80,000 (x 4 income multiple) leaving a deposit shortfall of £40,000 that her parents are funding.

However, with the unique 1st Start Mortgage, Jenny’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 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 £145,000, 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.

“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 Stephen Rodgers, Principal, Berkeley Consultants. I have had experience of anxious Chiswisk parents eager to help their offspring only to find that they are hampered by conventional terms and conditions. This will mean that parents can help their children to purchase their first property. So rather than waiting and witnessing property prices increase at a faster rate than their salaries, they can enter into the housing market immediately. "

This mortgage scheme is not only open to first time buyers but subsequent buyers also. In addition, it need not be a parent involved but any relative. The guarantor's name need not be entered onto property deeds. This should prove beneficial for Inheritance Tax and Capital Gains Tax purposes.

A range of fixed and discounted products are available on this scheme.

Life cover or deposits may be required

* Survey of Mortgage Lender Q2 2003, CML

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