Bank of Ireland launches first time buyer mortgage

1st Start, from Bank of Ireland Mortgages (BIM), revolutionises how First Time Buyers mortgages are financed. By the parent being party to the mortgage, it can include their income on the mortgage and together with BIM's flexible approach to the parent’s own mortgage commitment, it can provide extra funding and a unique solution in the marketplace.

Key Features of the 1st Start Mortgage:

- Provides FTBs with extra purchasing power

- Joint mortgage between the parent and child

- Competitive product range

- No additional security fee (MIG) – paid by BIM

- Available to 95% LTV

- Open to all occupations not just graduates

- Choice of property ownership – joint or sole title

- Based on our Standard Residential lending criteria

- Is uniquely different to a guarantor mortgage.

Why was 1st Start launched?

The average FTB LTV is 77%* and parents (or close family members) 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 and BIM developed the 1st Start Mortgage to offer them 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 two bedroom terraced property valued at £120,000. Under our existing rules we would be willing to lend £80,000 (x 4 income multiple) leaving a deposit shortfall of £40,000 that her parents are funding.

However, with 1st Start Mortgage, BIM would also include Jenny’s father’s income in the calculation and deduct his annual mortgage repayment from it, just as it would do for any other credit card or loan commitments. 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 then apply its standard income multiples to his remaining income and add Jenny’s. Therefore, BIM now would be willing to lend £145,000, allowing Jenny to secure her desired 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

Jenny’s father’s income £35,000

Less his annual mortgage repayment £3,750 (£75,000 mortgage x 5%)

Balance £31,250

4 x £31,250 £125,000

Plus Jenny’s income £20,000

Maximum advance £145,000

Rates offered include a 3.89% (APR 5.4%) 2 year discount and a 3 year fixed rate of 4.89% (APR 5.5%). There are no extended redemption penalties and the MIG is paid for by BIM.

Customers interested in finding out more about the 1st Start Mortgage should call the 1st Start Mortgage Team on 0118 968 4300.