getting a mortgage with parents?

sjaypink

hi, im hoping some one can clarify how this works.

a few friends have taken out mortgages with their parents, i have asked them how it works but they dont seem to know! -presumably their parents fa's dealt with it all....

my interest in this is that my and oh's parents have the ability to obtain a 95 (maybe even 100?%) mortgage where as it appears the best we could obtain would be 85-90%. our parents would not be paying anything at all, we'd just be using their names and credit status to get a better deal.

so, say oh took out a joint mortgage with his dad, or me with my dad, how long do their names have to stay on there before we can change it to our names only? and can we stay on the same deal if we do?

and if our parents bought a house for us so to speak (we'd pay them deposit, fees, repayments, but it would all in their name), do we have to 'buy' it from them at a later date, or can the names be changed on the mortgage. ie. year 3 mum comes off mortgage, my name put on, year 5, dad comes off mortgage, oh put on?

perhaps i havnt worded this particularly well, but i hope you catch my drift!

basically what possible ways are there to use parents 'credit/ capital power' to help get us on the ladder?

we are continuing to save but we're looking at about 5 years to have enough saved for 15% deposit +fees etc. houses prices have come down drastically in our area over the last 6months, and so hence our desperation. we're worried that if we wait 5 years things will have recovered and we'll be outpriced again! any advice?

thankyou for reading.

getmore4less

I would wait, keep saving and you will have 20% deposit very soon.

Buying with anyone is frought with risks so think carefully.

How it works will depend on the structure of the deal but migrating joint ownership from one group of owners to another is faily easy as long as you can get the loans, but it does cost with extra legals, If you can't get a mortgage now how sure are you will in say 5 years.

What might be a better option is your parents lend you enough to top up your deposit so you can get a mortgage and buy a place. cuts out the middle men if they have savings but not if they need to raise the money through their own places.

This reduces their exposure to you doing a runner or being unable to pay, say through job loss. if they are on the mortgage they are liable for the full amount and will probably have plenty of money/equity to pay it so be worth chasing.

These down turns do not sort themselves out in a few years think 10-15 you have plenty of time to look for the right place and save up for it.

Ask your parents about the last slump.

Remember property is a game of snakes and ladders(not just ladders), just no one landed on a sanke for a long time now every one has.

sjaypink

thankyou. we would actually prefer to wait and do it all ourselves, but theres such different information everywhere, some saying a blip, some say prices will drop for 6-12months. those that say its longer term, like 10 years, get labelled scaremongerers! its just that this is the first time since we left school that prices are within our grasp, but unfortunately not the mortgage (95%) that we need to buy!
thankyou for your advice, i realise youre right, just getting impatient!

Oldernotwiser

It's asking far less from your parents for them to lend you the deposit rather than to buy jointly with them. Have you suggested this to them?

getmore4less

Talk to your parents about the last slump their views will certainly be an influence on what options they would consider.

Also consider that buying ties you to an area moving costs loads more when you buy.

Along with a down turn is the job situation and you need to be sure your jobs are safe if buying, unemployed the rent gets paid the mortgage does not.

dux001

I shall not ever buy a house. Too many risks involved, and I doubt anyone would lend to me anyway. Renting is easier...if anything needs repairing, it's someone else's problem. You can move house at relatively short notice. And as for the so-called financial benefits of retiring in a house you own...well, you've still got to live in it! And you can't take it with you when you die.

If, like me, you will never have any children to leave it to, you are effectively buying a house for the state. No thanks.

Locoblade

dux001 wrote: »

.... And as for the so-called financial benefits of retiring in a house you own...well, you've still got to live in it! And you can't take it with you when you die.

There's a few flaws in your plan though, in your later years you'll continue to pay rent at the market rate as opposed to being mortgage free, or at worse paying a mortgage that has monthly repayments based on affordability 20+ years previous (ie cheaper), therefore a renter will in a far worse position to enjoy their retirement even if the buyer can't release euquity from their house whilst living there. My mum has just finished paying the mortgage on her 3 bed semi in Sussex, the mortgage when she was actually paying it was under £100 a month - rent on the same property would be £800-1000 a month at present rates. Mortgage repayments don't last for a lifetime, rent does. Mortgages also generally become cheaper in relative terms as the years go by assuming inflation isn't at a standstill over that entire time, and your earnings will be significantly more in 20 years than they are now.

If, like me, you will never have any children to leave it to, you are effectively buying a house for the state. No thanks.

If you rent you're basically buying a house for someone else anyway (your landlord), possibly several times over, so does it really make much difference? If the government getting their hands on your money after you die concerns you that much just leave a will and donate the proceeds to charity.

I wouldnt necessarily say that now is a good time to buy though, and in the current market renting would certainly be a better short term option than dropping into negative equity with falling house prices, but if you're planning to rent for life for financial gain, I fear you may lose out significantly. :rolleyes:

Oldernotwiser

Locoblade wrote: »

There's a few flaws in your plan though, in your later years you'll continue to pay rent at the market rate as opposed to being mortgage free, or at worse paying a mortgage that has monthly repayments based on affordability 20+ years previous (ie cheaper), therefore a renter will in a far worse position to enjoy their retirement even if the buyer can't release euquity from their house whilst living there. My mum has just finished paying the mortgage on her 3 bed semi in Sussex, the mortgage when she was actually paying it was under £100 a month - rent on the same property would be £800-1000 a month at present rates. Mortgage repayments don't last for a lifetime, rent does. Mortgages also generally become cheaper in relative terms as the years go by assuming inflation isn't at a standstill over that entire time, and your earnings will be significantly more in 20 years than they are now.

I absolutely agree with you except for the fact that if a renter is on HB, they're not paying any rent whatever age they are!

Locoblade

Oldernotwiser wrote: »

I absolutely agree with you except for the fact that if a renter is on HB, they're not paying any rent whatever age they are!

Yep thats true, but then those claiming housing benefit for life are very unlikely to have the opportunity to buy anyway, so its not really a choice they can make. From what was said above, it appeared that dux was trying to advocate renting for life as a viable choice to make financially.

Oldernotwiser

Locoblade wrote: »

Yep thats true, but then those claiming housing benefit for life are very unlikely to have the opportunity to buy anyway, so its not really a choice they can make. From what was said above, it appeared that dux was trying to advocate renting for life as a viable choice to make financially.

I think that dux was speaking fromthe point of view of someone claiming HB.

simpywimpy

If your parents buy it between them it wouldn't be their main residence and would incur capital gains tax when they sell/transfer it to you.

If God forbids, one of them was to die, you could end up paying inheritance tax on it too.

We did this years ago with a view to my dad giving it back to me when I was more financially stable. However, we haven't been able to do that because it would incur capital gains tax at up to 40%. We also had to change mum and dad's wills or dad would have been over the tax limit for that

I now technically have to wait for my dad to leave it in his will to me or pay a huge sum out to the goverment