THIS TRANSCRIPT IS ISSUED ON THE UNDERSTANDING THAT IT IS TAKEN FROM A LIVE PROGRAMME AS IT WAS BROADCAST. THE NATURE OF LIVE BROADCASTING MEANS THAT NEITHER THE BBC NOR THE PARTICIPANTS IN THE PROGRAMME CAN GUARANTEE THE ACCURACY OF THE INFORMATION HERE. MONEY BOX LIVE Presenter: PAUL LEWIS TRANSMISSION: 3rd JULY 2006 3.00-3.30pm RADIO 4 LEWIS: Hello. We’ve been told for years it can’t go on forever, but it does, house prices are once more rising strongly, up 9% a year according to the latest figures from Halifax. And borrowing to buy homes is also at record levels: we borrowed another £29 billion in May and we now owe a staggering trillion pounds in mortgages on our homes because even though prices are rising we’re still buying. I should add at this point that someone has already asked what I mean by a trillion. Well it’s the one with twelve noughts after it, which is a thousand billion or a million million – very big. And with the average house price now around eight times average earnings in some parts of the country, it’s more of a struggle than ever for those of us who want to buy their first home. So today Money Box Live looks at mortgages. How much can you, indeed should you borrow? How can parents help out with their children’s purchases and how do you choose the best deals? Lenders are more flexible than ever when it comes to people who are self-employed or who have strange working patterns. That can help you buy a home, but at what cost? And what about the deals for people with credit problems? Are they getting a fair deal? It’s not just interest rates of course you should look at. There’s been controversy recently over the fees lenders charge – up to £295 – when you want to pay off your mortgage, partly to process documents which sometimes don’t even exist. How can you keep those under control? Well whatever your question, you can call Money Box Live now – 08700 100 444. And with me today to answer your questions about mortgages are Ray Boulger, Senior Technical Manager at mortgage brokers Charcol; and Melanie Bien, Associate Director of Savills Private Finance. And the first question is from Anna in Dumfries. Anna, your question? ANNA: Hi. My partner and I are both self-employed, but my partner also works part-time and I’m in receipt of carer’s allowance for my son. I was just wondering, we’re first time buyers and where can we go to get a mortgage? LEWIS: Right, so it’s a slightly … not a traditional income, if we can put it like that. ANNA: No. LEWIS: Ray Boulger? BOULGER: Anna, how long have you been self-employed? ANNA: I’ve been self-employed 9 months and my partner 2 years. BOULGER: Okay. Now it sounds like the only route for you at this stage is probably going to be a self-certification mortgage because your partner is not going to have 2 years worth of accounts, I guess. ANNA: Yeah. BOULGER: If you go for a self-certification mortgage, what that means is that you have to state on the application form what your income is but the lender doesn’t check it. Now one of the benefits of this sort of mortgage in your case, apart from the fact that you won’t be able to prove your income for 2 years easily, is that some of these deals do allow you to take into account things like carer’s allowance. Some lenders merely require you to state on the form your total income and it’s perfectly acceptable to put down income from sources such as carer’s allowance. So that’s the sort of deal you’re going to need, but you will need to get good advice from an independent mortgage broker to make sure you go down the right route. ANNA: Right. LEWIS: And presumably, Melanie, there is a total income issue as well? Is the money going to be enough altogether to buy somewhere? BIEN: Absolutely. You have to look at really what you can afford and look at that very sensibly. There’s been a lot of negative coverage about self-cert mortgages and that some people have been overstating what they earn, etcetera. It can be tempting to do that because you don’t have to prove what you’re earning, but it’s very vital that you don’t overstretch yourself because you do have to make those payments out of your self-employed income and your benefits, so you’ve just got to keep that in mind. LEWIS: It is true though that lenders are much more flexible now. They don’t only look at three and a half times your earnings or whatever it used to be. They will look at what you can actually afford to repay. BIEN: That’s right. LEWIS: Anna, would it be rude to ask roughly what your total income was compared with house prices in the area? ANNA: House prices locally, we’re looking to get a two bedroom flat and we’re looking to spend about £90,000. And our income is probably about £15,000 a year, so it’s pretty tight. LEWIS: Right, so that’s about six times earnings. Ray? BOULGER: Well that is going to be difficult. Do you have any deposit to put down, Anna? ANNA: No, we don’t, no. BOULGER: No. I mean there aren’t any lenders that will go as high as six times on a self-certified basis, except perhaps for the Mortgage Works who have a rather different way of calculating what they’ll lend. Having said that, because you’ve got no deposit, that will be a problem because to go for a self-certified mortgage you will need to put down at least a 10% deposit and most lenders need 15%. So I think you’re going to have to either get some help from parents, if that’s possible, or save up a 10% deposit, or wait until you can actually prove your income because you’ve got enough accounts to show what income you’ve got. ANNA: Right. LEWIS: Does it sound, Melanie, as if Anna and her partner should perhaps wait a little bit – save some money, do some saving, have a bit more income history to talk about and then perhaps see about it in a little while? BIEN: Absolutely because then they’ll have more options available to them, it’ll make it easier. LEWIS: Okay, Anna, well good luck with that. Thanks very much for your call. And now we move to the other end of the country, Rona from Bromley in Kent. Rona, your question? RONA: Hello there. LEWIS: Yes, your question, Rona? RONA: Right. My husband and I, we’ve had a fixed mortgage for 2 years which is coming to the end of its term. We previously fixed it for 2 years before that. And we’ve noticed that we don’t seem to be paying off very much of the capital and the question is basically if we were to stay on with the product that we have currently, would we start eating away more at the capital and pay the mortgage off quicker than just you know re-fixing with another product? LEWIS: Okay and a fix, you mean you’re paying a fixed rate of interest that’s guaranteed? RONA: That’s right. LEWIS: May I ask you what the rate is? RONA: Something like 4.9%. LEWIS: So a fixed rate mortgage. What are the best options, Ray? BOULGER: Which lender are you with, Rona? RONA: I think it’s with the Woolwich. BOULGER: Okay, well the Woolwich are one of the lenders who will allow existing customers to have access to their new business rates. Having said that, their fixed rates are not particularly competitive at the moment. Now whether you’re paying the mortgage off or not actually is not dependent on whether you’ve got a fixed rate or a variable rate. It depends on - well how quickly you’re paying it off depends on what the term of the mortgage is. If when you changed your mortgage to the current 2 year fix, you went from one 25 year mortgage previously to another 25 year mortgage, then you’re certainly not going to pay the mortgage off very quickly. What you need to do if you remortgage is to keep the mortgage term as you’ve got, what you’ve got left outstanding at the moment, and then progressively you’ll start to pay back more of the capital each year. In the early years you don’t pay very much capital back because it’s mainly interest. Typically over the first 5 years, you’ll only pay about 10% capital back, and as you eat into that capital a greater proportion of your monthly payments consist of repaying the capital. RONA: So even though it would be say another lender, a completely different lender, and we reduced it from 23 years down to 21 years for the next fixed, you’re saying that doesn’t make any difference on how quickly you pay off the mortgage or whether you’re paying off more in the long-run by doing it that way than if you stay with the current product with a higher variable rate obviously but you’re you know starting to actually eat up the capital. Is that what you’re saying? BOULGER: Yes, you certainly shouldn’t stay with the Woolwich on their standard variable rate, which is 6.59%. The Woolwich do have a very good lifetime tracker rate, which is bank base plus 0.29%, providing that you don’t need to borrow more than 75% of the value of your property. So one option would be to switch to that and that would obviously be even slightly lower than the rate you’ve been paying at the moment, but because it’s variable you have to bear in mind that it will go up or down in line with bank base rate. RONA: Right. LEWIS: Okay, well some things to think about there, Rona. And, Melanie, just let me ask you. Fixed versus variable - just very briefly explain the difference and the options for everybody that they might want to choose and what they have to think about. BIEN: Yeah, I mean which one you go for really depends on your circumstances. A fixed rate is exactly that – you know that whether you fix for 2, 3 or 5 years, for that length of time you know exactly how much your mortgage is going to be every month. LEWIS: So even if bank base rate goes up or down, it doesn’t change? BIEN: No, it stays exactly how it is - so that’s great for people on tight budgets, particularly first time buyers. If you can afford to be wrong, and that is if the rates go up you can still afford your mortgage, a variable rate often works out (certainly from the beginning) slightly cheaper. And we’re seeing this at the moment – that you know discounted and tracker rates are cheaper than fixes - so you know that could be a better option. But if you need you know a guarantee every month for what you pay, then you have to go for a fix. LEWIS: Yes. And the discounted rates - they say they have a standard rate, which is about 6½% now, but they will offer you say 2% off that for the first 3 years or something like that? BIEN: That’s right, discounted offer – exactly. LEWIS: And at the end of that time, just as Rona is, you have to start thinking about remortgaging. BIEN: Remortgage, yes. LEWIS: Okay, so you’re thinking variable at the moment. Ray? BOULGER: Just to add to that, Rona, the money markets are currently anticipating that the base rate will go up by at least ¼% and probably a ½%. Therefore because the fixed rate pricing reflects what the money markets expect to happen, the current prices for fixed rate mortgages actually reflect the possibility of bank base rate going to 5%. So if you don’t believe bank base rate is going to go above 5% and if you don’t need the protection of a fixed rate, as Melanie’s just said, then a tracker rate is likely to be the best option. But if you’re nervous about rates going up above 5% or if you need that comfort, then go for a fixed rate. LEWIS: Okay, thanks very much for your call, Rona. And just before we go to our next caller, I’ve got an e-mail here that’s sort of related to this. Colin has e-mailed us to ask about offset mortgages and who these are right for. Melanie, tell us what they are and who they’re right for? BIEN: Well offset mortgages are a fairly new phenomenon, but increasing in popularity all the time. And basically it means that you can offset any savings you have and perhaps your current account and maybe even credit card against your mortgage debt. So for example if you owe £100,000 on your mortgage and have £10,000 in savings and offset the savings against the mortgage, then you end up paying you know on the £90,000 debt. And the advantages of them are you can take the savings out whenever you want; there’s no notice, so you have access to that - a lot of flexibility. But really they only suit people with a certain amount of savings. If you don’t have much to save - because the rates of offset deals tend to be higher than on mainstream residential deals, you know you’ll be paying a bit over the odds and if you don’t have the savings you won’t be able to benefit from that. LEWIS: Yes, so if you’ve got a current account where you have quite a lot of money going through it or you have a savings account – self-employed people saving up for their tax bill, something like that – they can be a very good deal? BIEN: Absolutely because interest is calculated daily, so even if you know your salary’s paid in on the first day of the month and it’s all gone by the end of it, you are benefiting while it’s in there. LEWIS: Yes. So a good deal for some people. So I hope that answers your question, Colin, who e-mailed us. Thanks very much for that. And now let’s move onto Pat who’s calling us from Eversholt. Pat, your question? PAT: Hello. I recently assisted my daughter in remortgaging when her mortgage came to the end of its fixed term. And we went into the marketplace and shopped around but at the end of the day the best deal we could get was with the company she was already with, and they still charged us nearly £500 set up fee and I can’t see how it is possibly justifiable. LEWIS: Right, so she had a mortgage. Who was it with, Pat? PAT: Cheltenham & Gloucester. LEWIS: Right. And did she move to a different mortgage with Cheltenham & Gloucester? PAT: No, no. LEWIS: The same mortgage? PAT: Same mortgage. LEWIS: Okay. Ray? PAT: Except it was originally on a - it was fixed for a period of 2 years and that came to an end. BOULGER: And are you saying, Pat, that at the end of that 2 years she then took another deal, another fixed rate from Cheltenham & Gloucester? PAT: Yeah. BOULGER: Right. So basically the original mortgage was a 2 year fixed rate and then it would have reverted to Cheltenham & Gloucester standard rate, which currently is 6½%. PAT: Correct. BOULGER: So what she’s done is changed her mortgage and effectively the two options that would have been worth looking at, which you clearly did, was either to remortgage to another lender or take another deal out with Cheltenham & Gloucester. Now the way that lenders price their fixed rate mortgages up is to incorporate an arrangement fee, which typically today is around £500, and effectively the higher the arrangement fee, the cheaper the interest rate they can offer. So you’ll find that some lenders offer a choice of one deal at one interest rate with one arrangement fee and an alternative deal with a higher arrangement fee at a lower rate. But because of the way the lenders do price their fixed rates up, if you do go to another fixed rate with the same lender you will nearly always pay an arrangement fee. Now there are options with some lenders to actually pay no arrangement fee, but in exchange for doing that you will have to pay a higher interest rate; and whether it’s worth doing that depends solely on the size of the mortgage. If you have a small mortgage, then no arrangement fee and paying perhaps an extra ¼% on the rate may well make sense. With a large mortgage, the interest rate becomes more important. LEWIS: Yes, I know you and I don’t agree about this, Ray, but I always think these set up fees, these arrangement fees are a bit of a rip off because you know if you go into Dixon’s and buy a television and it’s £350 and they say “Oh but there’s a charge of £100 to walk in the shop”, it’s a bit of a cheek to me. BOULGER: Well I think the rip off is the exit fees where … LEWIS: Well we’ll come onto those. We’ve had an e- mail about them. Let’s raise those as well while we’ve got Pat on the line because we’ve had an e-mail from James who says he had an endowment mortgage for 15 years. He’s paid it off. It’s with Halifax and he’s been charged what they call a repayment administration fee of £175 and a deeds despatch fee of £50, which is £225 for ending the deal. Now those have gone up, haven’t they? They started at £50, even nothing for some lenders, and now I think at their highest they’re £295 with Abbey National. BOULGER: Alliance & Leicester. LEWIS: Alliance & Leicester, I’m sorry. BOULGER: That’s right. Yes, I think Abbey’s £225. LEWIS: Abbey National, please don’t write to us. BOULGER: Yeah, I mean Pat in your case you looked around and you actually found that it was cheaper to stay with Cheltenham & Gloucester despite paying them the £499 fee. Now had you have changed lenders, you might have had to pay a valuation and legal fees, although a lot of lenders will actually not charge you those. So I think the point there is that despite having to pay that fee, C&G you found still offer the best deal. With exit fees, the big problem is that most lenders do not charge you or at least don’t guarantee to charge you when you redeem the mortgage what figure they quote on the key facts illustration. There are two lenders – Alliance & Leicester and Northern Rock – who guarantee that what they show you on the illustration is what you will pay. LEWIS: Only for new borrowers though. We must stress that. This is from now on, isn’t it? BOULGER: Well actually Alliance & Leicester are also guaranteeing that for existing borrowers, as it happens. So with Alliance & Leicester … PAT: Can I interrupt momentarily there? BOULGER: Yuh. PAT: You see the whole point that you’re making is the fact that you’ve got this deal or that deal or you can change it to this deal and it depends which way you’re coming and which way the wind’s blowing. The person that’s actually making the purchase or purchasing the mortgage can’t really see the wood for the trees because it’s all very well you say ah well, the reason is this because that’s one reason and now you’re coming up with other lots of little bits which you’re adding on like exit fees and things like this. Why can’t we have it straightforward? LEWIS: Well I must say, Pat, I tend to agree with you. Melanie, where do you stand on this because it makes it more difficult to compare the deal, doesn’t it? PAT: Of course it does. LEWIS: You’ve got an interest rate of say 4%, but one lender will charge you a big introduction fee; another will charge you a big exit fee; one will charge you both. It’s very hard to make - I mean we’ve had another call from somebody – I think it was with Abbey – who said it’s £225 they charge and she wants to know is that legal, can she challenge it because it wasn’t in the contract when she signed it? BIEN: I mean all these things, they’re actually good news for brokers because you have to look at the total cost, you have to look at the rate and the fees, and, like you say, there’s several different fees, they’ve all got these bizarre names, they all call them something different and it is very confusing. LEWIS: Well they sometimes call them deeds release fees and there aren’t any deeds any more because all the information’s held electronically. BIEN: Well absolutely. This is rubber-stamping, isn’t it, and they’re charging. What really bugs me is that one lender can charge - like Nationwide charges £90 for this and another lender, Alliance & Leicester, is charging £295. I mean what extra work are they doing to justify that extra fee? LEWIS: I mean we suspect, is it a way of keeping down the headline interest rate by putting up these other fees that a) are hard to understand and b) you don’t really know when they’re going to hit you, but you concentrate on that good 4% deal and then suddenly there’s another £500 to pay. BIEN: Well if you look at the best buy tables, a lot of the best, the cheapest deals do come with the biggest rates – biggest fees, sorry – so you know there’s a cost there, and it depends on the size of your mortgage whether it’s worth paying the higher fee and getting the lower rate. LEWIS: And when you say it benefits brokers, I suppose like you two, that’s because it’s very hard for us ordinary mortals to work out the sums, Ray. PAT: Well that’s the whole point, isn’t it, you see? Us mere mortals. I mean you people are in the business. I’m a mere mortal. LEWIS: Well I am too. They’re in the business, Pat. BOULGER: And it’s not only arrangement fees and exit fees. There’s other smaller fees which are, in my view, totally out of proportion to the real cost. For example, most lenders charge what most of them still call a telegraphic transfer fee, although telegraphic transfers were disappeared years ago. They should now call it a CHAPS fee. Typically lenders charge £35 to £40 for a CHAPS fee and that will cost them relatively little – probably £2 or £3 tops. They’ll often charge £25 to £35 if you don’t arrange your buildings insurance with them – theoretically so that they can check that you’ve got suitable insurance, but in practice they delegate that to the solicitor. So you do need to look at the whole picture. LEWIS: Okay. And a number of people have said can they challenge them. Of course the Financial Services Authority is looking into the legality of exit fees, isn’t it, and other fees generally, Ray? BOULGER: They are indeed. The Financial Services Authority has asked all lenders to justify the basis of their exit fees by later this month, and indeed a number of people have written to the Ombudsman to complain when they’ve not got satisfaction from their lender about exit fees. And typically because the lenders in my view are scared of the Ombudsman fining against the lender because it will set a precedent, so if your lender won’t agree to reduce the exit fee to what they quoted when you took the mortgage out, my advice is write to the Ombudsman and in many cases the lender will then reduce the fee to what they originally quoted. LEWIS: Okay. Or even threaten to write to the Ombudsman … BOULGER: Indeed. LEWIS: … because they would rather avoid the charge than going to the Ombudsman. BOULGER: Absolutely. LEWIS: Though you might have to write two or three times. Anyway we’ll leave that there, but we did cover this on Money Box a couple of weeks ago and you can find the transcript of that programme on our website, bbc.co.uk/moneybox. And you’ll also be able to find a transcript and another recording of this programme in a couple of days time if you want to check up on anything you’ve heard today. Let’s move on. Dom is calling us now - thank you very much, Pat, by the way for your call, which started a wonderful discussion. Dom is calling us now from Brighton. DOM: Hello there. LEWIS: Hello, what’s your question? DOM: I’m not actually looking for a mortgage at the moment because I’ve gone back to university to retrain, but prior to that I had a lot of trouble or I found it impossible to find a mortgage. Because I have cystic fibrosis, which is considered a life threatening condition, I couldn’t get life insurance, so it was a non-starter. I was wondering if anyone had any suggestions for how I might get round this? LEWIS: Melanie? BIEN: I’m intrigued that you felt that you had to have life insurance to get a mortgage because while it’s well worth having, particularly if you have dependents or especially if you have dependents, it’s not a requirement for having a mortgage. The only insurance that is, is buildings insurance because lenders want to make sure that you know if the property burns down that you’ll be able to cover the cost of the mortgage. So can I ask, did a lender say this to you or was it a broker? Where did you hear this from? DOM: Well I’ve spoken to various other people with the condition and they say they’re in the same situation, so I didn’t even bother to sort of start going to lenders because I was under the impression that it wasn’t worth trying. LEWIS: A knowing nod from Ray who thinks he might have the answer. BOULGER: Well I think, Dom, you’ve actually just answered your own question. When you have a situation like this, it’s all very well taking advice from friends who mean well, but actually what you need to do is speak to a professional. And, as Melanie says, there is no longer any requirement from any lender that you should have life insurance with a mortgage. Most lenders will recommend it and for most people it makes sense, and it certainly makes sense, as Melanie says, if you’ve got dependents. Critical illness cover likewise may make sense, but it is not a requirement, so as long as you understand the risks of having a mortgage without life insurance, you know that’s basically down to you. It will not stop you getting a mortgage. LEWIS: And Ray, just briefly, any suggestions? Are there any particular lenders? Will any lender lend to somebody in that situation? BOULGER: No lender these days makes it a condition of the mortgage offer that you have life insurance. LEWIS: Okay. So, Dom, it looks as if go to a good broker or indeed just make some calls from contacts on the Internet and see how you get on. Thanks very much for your call. We move onto Carolyn now who’s calling us from Stroud. Carolyn, your question? CAROLYN: Good afternoon. I would be a first time buyer. I’d like to be a first time buyer. I’m 54. I have about or will have about £80,000 to put down on a mortgage, but the two or three people I have approached so far have said that I have to have been in my own business for at least 3 years before they would consider me for a mortgage. Is that correct? I mean would that be with everybody or …? LEWIS: You’re in business, Carolyn? CAROLYN: Yes, I’ve got my own small business. LEWIS: Right. And you’ve got your accounts; you know what your income is from that business? CAROLYN: Yes. LEWIS: Yes. Ray? BOULGER: I assume, Carolyn, you’ve spoken to some banks or building societies direct rather than a broker? CAROLYN: Yes, yes. Well I was just sort of putting my toe in the water a bit to see what was going to happen. BOULGER: Okay. Well you need to get advice from a good independent broker because there are plenty of lenders who will lend to somebody who’s been self-employed for 2 years. CAROLYN: Right. BOULGER: A few will even accept one year’s accounts plus a projection. CAROLYN: Yuh. Well I’ve been in business for about 18 months so far. BOULGER: Okay. Well that will limit your options, but if you’ve got accounts it will certainly be feasible. If you haven’t got accounts, you may have to resort to a self-certified mortgage, which will be a little bit more expensive. CAROLYN: No, I have accounts. BOULGER: Fine. And so what I would suspect has happened is that the lenders that you’ve spoken to are ones who’ve still got a requirement for 3 years accounts, which quite a lot of lenders do have but there’s plenty who don’t, so it’s just a question of finding the right lender. CAROLYN: Yeah. The other question is if the moment I’m renting and I can basically keep up with £600, £650 a month, what sort of mortgage would that entitle me to? LEWIS: It’s probably more a question of your earnings. Melanie? CAROLYN: Well yes. I mean that is what I can afford at the moment. LEWIS: Okay, Melanie? BIEN: Yes, it might be a personal question but that’s exactly what the lender will want to know, is how much you know you’re earning at the moment; and then I mean depending on which lender you go for, whether they go for a strict income multiple or they work from affordability calculation, it would depend on how much you can borrow. CAROLYN: Well between £20,000 and £23,000 a year at the moment and going up, hopefully. LEWIS: Yes, that’s your income. But you’re already paying £600 odd in rent, so that will help, Ray, won’t it, if she’s shown she can pay that much. What could she borrow on that sort of amount? BOULGER: Well I think the key issue here, Carolyn, is your age because at 54 a lot depends on when you plan to retire. (Carolyn laughs) If you plan to continue working beyond 70, for example, then you might be able to get a 20 year mortgage, but if you want to retire at 65, then you’re going to have a problem repaying the mortgage at that stage. So that’s something you need to give serious thought to. CAROLYN: Yuh. BOULGER: If you can’t afford a repayment mortgage over the period that you plan to work to, one alternative solution is to take an interest only mortgage for say 10 or 15 years. Start making overpayments on the capital as much as you can afford. CAROLYN: Overpayments? BOULGER: Yes. A lot of lenders, most lenders in fact, will allow you to overpay typically up to 10% a year without incurring an early repayment charge. So one solution could be to take an interest only mortgage for 15 years, assuming you plan to work till at least 70, and then actually in addition to the interest pay as much as you can off, so that by the time you get to 70, hopefully as your income goes up you can accelerate the amount you overpay and you’ll have paid the mortgage off. But you do need to bear in mind that it’s your responsibility to do that and at the end of the day if you actually haven’t paid the mortgage off, you’ll have to look at other options – either working for longer or paying it out of your pension or perhaps taking out a lifetime mortgage. LEWIS: Okay. Alright, well thanks very much for your call, Carolyn. Let’s move onto Keith now who’s calling us from Nottingham. Keith, your question? KEITH: Hi. I’m considering getting a mortgage because I’m selling my current property. I was interested in an offset mortgage which as a single person would suit me, I think, but I’m actually buying with a friend and what I wouldn’t want to do is to open a joint account where both our wages are paid in, which seems to be one of the conditions of an offset mortgage. I just wondered is it possible to get an offset mortgage on that basis because basically we don’t want to entangle our personal finances together, if that makes sense? LEWIS: Yes, indeed. It’s sort of almost two questions in one, isn’t it -offset, which we talked about a few minutes ago, but also this question of buying jointly with someone without entangling all your money – much more common now? KEITH: That’s right. And also of course it may not be a 50-50 split and I wondered how that worked with an offset mortgage as well? LEWIS: Right. Melanie? BIEN: I mean the key thing here is many people find themselves in this position – they’re buying with someone whether it’s a friend or a family member, etcetera, and maybe putting down different deposits, not be paying the same amount of mortgage every month. The key is really to get some legal advice early on and get everything written down, you know, so everyone knows where they stand because it’s perfectly reasonable for one of you to put down more than another and for you to have different mortgage payments every month. But it all needs to be set out and you also need to know you know what’s going to happen when one of you decides they want to sell up. You know you basically need an exit policy in there as well, so you know what’s going to happen. KEITH: Yeah. And would you be able to get an offset mortgage on the basis of that? I mean how would that work? Most of them seem to require that you have your wages paid straight into the offset mortgage account. BOULGER: Actually, Keith, it would be quite possible to do what you want to do, but in addition to all the cautionary words that Melanie’s just said, you need to bear in mind that if you have some money in an offset account and your friend doesn’t, then the mortgage interest payments are going to be reduced. You could for example have a joint mortgage. You could have a separate current account or savings account with the lender and your friend could have a separate account as well, but if you have more money in your account than your friend, then effectively you’re subsidising your friend’s interest payments, so you need to work out very carefully how you’re going to deal with that. KEITH: I must admit I hadn’t thought about that. I mean we have bought property together for 28 years, so I mean you know it’s not really an issue with the finance, but I must admit I hadn’t considered that. LEWIS: No. BOULGER: So it’s possible to do what you want, but you need to work out how you’re going to deal with it. LEWIS: Need a bit of thought, Keith. I’m sorry, I’m going to move on because we’ve got another call waiting and we’re nearly out of time, but thanks very much for your call, Keith. It’s an interesting subject there. Liz calling us from Telford. Your question, Liz? LIZ: Ah yes, we have an endowment mortgage and, like many other people, we were advised to have that. But now we have a problem in that we have quite a shortfall that we don’t know what to cope with basically. Should we extend our mortgage? Should we transfer our mortgage? And where to? LEWIS: Okay, let’s get some options because we are running out of time now. Melanie? BIEN: The important thing isn’t to panic, but you do need to take some action - so I mean depending on how many years you have left on your mortgage, you know what sort of money you’re talking about will depend on the action you take. Probably not worth putting more money into the endowment – there are other options, other investment funds, etcetera, that may help to reduce the amount you owe. But it’s important not to panic because I mean the stock market has recovered recently. You know we’ve had a couple of difficult years and now it’s recovered, so it might not be as bad as it seems. LEWIS: Ray? BOULGER: You could simply start to make overpayments on your mortgage, Liz. You could switch to a repayment mortgage if you wanted to, but my advice would be just to actually make overpayments and that will eat into the shortfall, and that keeps it nice and simple. LEWIS: Yes, so just pay more than they’re actually asking and slowly that will reduce. BOULGER: But make sure that won’t incur early repayment charges. LEWIS: Okay. Liz, thanks very much for your call. We must end it there. That’s all we have time for. My thanks to Ray Boulger of Charcol and Melanie Bien from Savills Private Finance. And thanks to all of you for your calls, which were coming in thick and fast, along with your e-mails. You can find out more about mortgages from the BBC Action Line – 0800 044 044 – or our website, bbc.co.uk/moneybox, where you can listen to the programme again and, as I said, in a couple of days you can read a transcript there. I’m back at noon on Saturday with Money Box and I’ll be here to take more of your calls on Money Box Live next Monday afternoon. 13