Credit crunch affecting guarantor mortgages?

morg_monster

Hi,
Me and my fiance hope to be FTBs sometime in the next 12m. (yes we are totally au fait with the current housing/mortgage etc situations thanks to this site, so no need to advise on that unless you really want to!). We'd initially hoped to buy this spring/summer but put it on hold to see what was going to happen.
I'll be starting a fully funded PhD this October and so am not going to have a "normal" income, and have read that this can be a problem for many mortgage providers who will just ignore any stipends etc. Having said that, my take home will be around £18k due to studentship (not taxed) and part time work at uni (within taxfree allowance). My OH earns about £42k in a "normal" job.
We will be buying in greater london/surrey area, and looking at borrowing around 200k mark (hopefully less, have a deposit of ~25k). So we are likely to need a guarantor to cover my part of the mortgage, and my my mum and dad have offered to act as guarantors for us should we need it until I finish the PhD and go onto a salary again (~3yrs). Dad is still working and earns a lot, and has a ton of equity in the house (very fortunate).

So my question is, how has the credit crunch affected this kind of mortgage? What are rates like for guarantor or part-guarantor mortgages? I've found precious little info on the web (most of what I've found is pre-credit crunch) and we are not at the stage of going to an advisor yet (not least because my finance is set in stone yet for PhD). So am very grateful for any advice or pointers anyone can give me. Thanks a lot.

ziknik

Could you borrow some money from your parents instead of asking them to guarantee your mortgage (without them re-mortgaging to get it). It is less risky in the event of something going wrong.

You are not far away from sensible multiples on your OHs salary alone. 42 x 4 + 25 = 193 (plus whatever you can borrow from parents)

Make sure your parents are fully au fait with the current housing/mortgage etc situations too.

It’s sensible to draw up an agreement between you an OH saying who paid what, and what each party ‘owes’ the other. Call it your budget plan, sit down and write it together and keep it safe.

morg_monster

ziknik the loan is a good idea. I might bring that up with them; that idea would actually make me happier although I think my dad would rather just be the guarantor. He has a pretty set idea about where his money is and eg just gifted us some money to go towards our wedding next year. You are right we are not too far off on multiples (assuming we could get 4x; no idea on that); plus the income I'll be getting for part time work will be around 5k which they probably will be happy to take into account. If we were only 5-10k off the amount we needed I'm sure dad would be happy to loan us that; if it was much more it would probably require too much juggling around of his stocks/shares/ISAs/bonds etc!!!

happybroker

If you're considering doing this then there really is no reason why a mortgage advisor wouldn't talk to you about it now as it might lead to some business in the future, find a decent broker and meet for an informal chat to put your mind at rest.

Guarantor deals are still available but obvsiously this can change but I think as things stand today you may well not need one (based on limited info obviously).

You can still do the mortgage jointly and not use your income. I think Ziknik might be referring to a declaration of trust which would set out the terms of your ownership of the property and is common when people own the property in shares (say 60/40) or when one has put the entire deposit in. Seek advice on that if it's something your worried about it as they have to be worded in a specific manner to stand up in court.

Good luck

SouthCoast

Bear in mind Inheritance Tax implications.

Conrad

Guarantors are not particularly useful in most instances and the majority of lenders will not be interested as the rules around responsible lending and repossession become pretty dense where guarantors are involved, particularly where they are nearing retirement age.

I tend to advise people that introducing gurantors, far from helping, simply introduces more unnecesary complexity and certainly restricts the deals available.

ziknik

I’m not sure if I was referring to a declaration of trust. It’s not a very pleasant thing to produce just before you get married. Did you see what happened on Hollyoaks when Max asked Steff to sign a prenuptial? Not a good idea. I was thinking of something more informal.

I can’t see any inheritance tax implications if the money is a loan. It needs to be paid back the same in any event.

morg_monster

heh heh and look what happened to them afterwards (hollyoaks...)

Conrad and happybroker thank you. It is great to get some perspectives from the brokers/advisers on this site. Seems like if we can afford it without a guarantor it will make life a lot easier :0) especially as we would be happy with borrowing 4x OH salary since I would be contributing, its just the banks that will be ignoring me!! Right now just need prices to fall a little bit more and we can do it... or lower our expectations of our first place ... or have a "small, intimate" wedding ... think I'll go for the first one!