s My partner and I have a huge dilemma and was wondering if you could think about our problem before we take the next step. Basically, we are looking to combine our assets and buy a home together. I own property, where we currently live, worth at least £550,000 with a mortgage of £140,000. My partner recently sold his property and also has £160,000 cash to buy our new home. He earns £120,000, I make £80,000 and together we have been told we can get a very large mortgage in the region of £1.2m to £1.3m.
The problem here is that as I make more deposits, which means I own more property, I worry about splitting the higher mortgage evenly, leaving me with little savings after paying off each month. Whereas my partner, who earns more, will be left with a lot more.
a I think getting a huge mortgage just because you can afford it is very risky. It’s mostly because you don’t seem comfortable with the idea, partly because of the way interest rates go and because it seems like an odd way of approaching things.
Using your own borrowing power to decide what type of property to buy seems odd. What should determine what you ultimately need to borrow is the value of the type and size of the property you want and the area in which you want to live.
If the amount you need to borrow is more than four times your combined income – £800,000 – you will either need to rein in your property plans or use an independent mortgage broker to find a lender willing to offer more generous terms. Some lenders, for example, are willing to agree to up to seven times the annual income, but they are rare.
On a positive note, if the maximum you can borrow turns out to be £800,000, this means that the maximum you can pay for a property is £1,350,000 (after allocating £20,000 in land tax and legal costs). But this means that your mortgage will represent just under 60% of the value of your home, which in turn means that you should have access to very competitive interest rates.