6.8% Fixed for term

mstopham

First off this is not a mortgage on the open market it is though effectively what I am being offered by my dad.

I would like to know who would take a mortgage of 6.8% fixed interest only, Overpay or pay off whenever I like no penalties.
No fees
No credit search, application criteria or 3 month only offer.
100% mortgage (I have no deposit of my own)
And the debt is wiped on death (He was going to buy a property himself and I would inherit it but with IHT)

Who would take this offer (assuming they were looking to buy or remortgage) and who wouldn't and why?

cocktail

mstopham wrote: »

First off this is not a mortgage on the open market it is though effectively what I am being offered by my dad.

I would like to know who would take a mortgage of 6.8% fixed interest only, Overpay or pay off whenever I like no penalties.
No fees
No credit search, application criteria or 3 month only offer.
100% mortgage (I have no deposit of my own)
And the debt is wiped on death (He was going to buy a property himself and I would inherit it but with IHT)
Who would take this offer (assuming they were looking to buy or remortgage) and who wouldn't and why?

this was my svr when the BOE rate was 5.75%. its too high at the moment.
rest of the conditions are good though. can he not get the rate down to a more reasonable one for family.:D

paulfaz

You mean your Dad's lending you the money then?

Good for you because it's not a secured loan - if you default or lose your job your home won't be at risk. He's squeezing you a little on the interest rate though!

Cozworth806

What incentive is there to pay back the capital (unless you want to reduce your monthly outgoings?)

luckyfool

Currently the rate would be great (as a 100% deal), you would be looking at that kind of rate for even a 90% mortgage now. My only concern is whether he would be expecting 6.8% even 5-10 years from now when you might be at 70% or even better, and could possible access a better rate on the open market? Of course you could remortgage then and pay him back if that was what you wanted, but then that almost defeats your intention to avoid inheritance tax.

mstopham

Cozworth806 wrote: »

What incentive is there to pay back the capital (unless you want to reduce your monthly outgoings?)

Profit/savings. Basically he has money he would invest himself if I don't take him up on it, he is looking for a 7.5% return with some fees to come off so it would be 6.8%

He has said that if we buy somewhere and subsequently sell then we would split the profit's 50/50.
So if I borrow £100k, pay back £50k and sell at £150k I would get £75k and him £75k

So everything I pay in I am going to get back plus reduce the monthly outgoing.

mstopham

luckyfool wrote: »

Currently the rate would be great (as a 100% deal), you would be looking at that kind of rate for even a 90% mortgage now. My only concern is whether he would be expecting 6.8% even 5-10 years from now when you might be at 70% or even better, and could possible access a better rate on the open market? Of course you could remortgage then and pay him back if that was what you wanted, but then that almost defeats your intention to avoid inheritance tax.

Yes you have the nail on the head there. So the question would be which saves more, the lower mortgage payment or the possible tax savings.

Also our intention is to save up and buy our own home as well and depending on market conditions sell or rent the property purchased with my dads money. I would see several avenues open to us on this.

getmore4less

He wants his cake and eat it.

He invests his money at a sure fire, no risk, no work rate of 6.8% nowhere else can he get this.

Then he want you to invest it in a house and he gets 1/2 the profit if you sell, what happens if you do it up a bit? What happens if you sell at a loss?

Not really fare, as a rental he would get all the profit but be liable for the repairs etc and take the if you take on all those tasks then he is really just giving you a loan.

whats the net rental yield on a place like you plan to buy thats a guide to a fairish fixed rate.

If the intention was to avoid IHT better would be an outright gift of the money then you gift him money from your excess income just need to avoid the two being seen as linked.

If you pay him interest there is income tax liability.

mstopham

getmore4less wrote: »

He wants his cake and eat it.

He invests his money at a sure fire, no risk, no work rate of 6.8% nowhere else can he get this.

No risk is not entirely true, I have to be able to give him his return.

Then he want you to invest it in a house and he gets 1/2 the profit if you sell, what happens if you do it up a bit? What happens if you sell at a loss?

Basically I would be renting but with it in my name. I was looking at it as renting with a potential gain.
If I put anything into it I get that back out.
If it is sold at a loss it would be like everyone else with negative equity I guess, stump up the loss, don't actually sell, don't pay back. Though I would have the option of moving and renting it out myself.

Not really fare, as a rental he would get all the profit but be liable for the repairs etc and take the if you take on all those tasks then he is really just giving you a loan.

True but any costs of repairs I would recover on sale, he has agreed that anything I spend on the property would be recoverable so long as he gets his initial investment back.

whats the net rental yield on a place like you plan to buy thats a guide to a fairish fixed rate.

About £500 - £600 a month at a guess looking at similar properties in the area.

If the intention was to avoid IHT better would be an outright gift of the money then you gift him money from your excess income just need to avoid the two being seen as linked.

If you pay him interest there is income tax liability.

The gift method would basically be it, though he buys me the property as a gift.