Wealth Check: 'We want to buy a place of our own'

Working as an environmental consultant, Jack is currently the sole earner since Livvie recently gave up her job to work as a freelance psychometric profiler. She would consider supplementing her freelancing with part-time work to improve her finances.

As well as some savings, both Jack and Livvie have the possibility of help from their parents, who could contribute up to £70,000.

Jack is also keen to enlist his parents' support because he may start studying for an MBA in September. The fees would be at least £40,000.

We asked three financial advisers for their help: Meera Patel of Hargreaves Lansdown, David Hollingworth of London & Country and Julian Greenwood of WestPoint Group.

Case notes

Jack Cunningham, 28, and Olivia Hermens, 25, North London

Personal: Jack is an environmental consultant based in London and Livvie is in the process of setting up as a freelance psychometric profiler. Jack earns a salary of £27,000, while Livvie aims to earn £25,000 initially.

Savings: Jack has savings in various accounts, into which he pays a set amount each month. Livvie has money from an inheritance but this is being used to help her kickstart her business.

Pension: Jack is currently paying 4.5 per cent of his salary into a company pension fund. This contribution is matched by his employer.

Debts: Jack has credit card debt totalling £2,400 and owes £1,400 to his parents from his time at university. Livvie has a student loan debt of £12,000 to pay off.

Monthly expenditure: Living expenses £2,000; holidays £1,500 a year.

DEBT

Jack and Livvie need to make sure they are free of any debt, including credit cards or loans, before considering saving or stepping onto the property ladder, stresses Meera Patel. Most forms of debt would work against them when they try to secure a mortgage.

They also need to make sure they have some cash set aside for emergencies or unexpected expenses. Typically this should be at least three to six months' worth of their salaries. The average mortgage lender would offer three times an individual's salary, although it is not uncommon for mortgage companies to offer up to four times a person's salary these days.

Patel would not recommend anything above this multiple as it would be risky, particularly if the couple will be relying on one income during the early years of their mortgage.

MORTGAGE

Based on Jack's salary, an affordable mortgage would be between £81,000 and £108,000. Even though their parents may be able to provide some money towards buying a property, Jack and Livvie have to be realistic about prices in Highbury. With a £40,000-£50,000 deposit, they should not really be looking at properties valued at more than £155,000 right now.

They should also remember that additional funds will be needed for solicitors, surveyors, stamp duty, furniture and other costs. For this Jack and Livvie need to set aside at least £5,000.

There will be lenders that can offer more flexibility, adds David Hollingworth, particularly with the advent of affordability models now being used by many major lenders such as Nationwide, Alliance & Leicester and Halifax, so a little more could be available if they credit score well.

All eventualities must be considered when buying a house, continues Patel. What would happen if Jack and Livvie broke up? How would they deal with the split financially? This could potentially affect their parents too if they were involved in the mortgage.

THE BUSINESS

Livvie's priority must be to clear her student debt. If her parents are in a position to help on this matter, then this is where part of the money should go first.

If Jack is planning to study for an MBA, even with the help of his parents the numbers simply don't add up in terms of the cost. If he takes out a loan to help fund the MBA, he's back to square one, with debt that will work against him with a mortgage company.

This position will of course change once Livvie establishes her business and if she can lift her earnings, says Hollingworth.

However, lenders will want to be able to see some evidence of these earnings and will be looking for at least one year's accounts, if not two or three. There are specialist schemes where the self-employed can self-certify their income but these often require 12 months' trading and charge a higher interest rate.

New businesses are renowned for taking a while to get off the ground, warns Julian Greenwood, and Livvie really needs to be sure of her income before taking on the commitment of a 25-year mortgage. Jack's plans to do an MBA would increase his income and employability, but all this is future-based.

OTHER OPTIONS

A parent acting as a guarantor may be of use in bolstering the couple's currently limited borrowing capacity, says Hollingworth. In this situation the lender can take the parent's income into account to guarantee the mortgage, even though their child cannot satisfy the income requirement in their own right.

The parent would usually need to be able to show that they can cover not only the new mortgage but also their own mortgage and any other liabilities. Some lenders, such as Scottish Widows Bank and Skipton Building Society, only need the parental income to cover the shortfall amount plus other commitments.

Bank of Ireland's First Start scheme can also be useful in bringing parental income into the equation. It may be possible to convert the property to a buy-to-let investment - if the existing lender consents or by switching to a buy-to-let mortgage - if Jack and Livvie need to move in with their parents but they will need to be confident that they will be able to let out the flat.

A property that suits them as a home may not be a good buy-to-let property and will always run the risk of tenancy voids when there is no rental income but a mortgage that still needs to be paid.

By taking on a buy-to-let property, adds Greenwood, the couple are securing a position on the ladder and the lenders will be assessing risk on the rental income as opposed to their personal incomes. There are many lenders who would be willing to finance them with the deposits available, and this route provides an opportunity to select an area that is good for rental income and not necessarily where they want to live.

It's really a case of Jack and Livvie working out where their priorities lie, continues Hollingworth. On the upside, house price inflation has eased and has been relatively flat. While some areas could increase more quickly than others, at least the market is not running away quite as quickly as in recent years and so they should not be panicked into buying.

Patel suggests that the best course of action is to either continue renting or consider moving in with either set of parents if Jack and Livvie want to save more money for a property in the future.