Daft questions?

jimmy_stewart

Just put offer in on house which has been accepted. Whilst I'm rapidly becoming quite knowledgable on the different types of mortgage we have to choose from (need to decide this weekend so look out for new post re this!) can someone clarify these apparently basic questions?

I want to borrow about £130k to buy a home for my daughter (she will contribute to the repayments). Only have £30k still owing on my home which is worth almost £200k. Looking to remortgage with new lender. Online quotes ask for value of "property". Which "property" is this? Mine or the new house? Also when it says loans of 95% (or whatever) of value again is this the new property? Just rang Nationwide and they say maximum is 95% but advice I have been given by broker is that 100% ok as the other 5% is in our equity.

Related to this does there have to be a valuation survey on the NEW house? I thought I could remortgage for any purpose so surely the question is is my own home worth what I say it is? That said I know I will have to get some kind of survey on the new home but will the lender just take my word re the value of my own home?

Finally daughter's name will be in legal document as "joint owner" based on her % of contributions to us to help pay mortgage but can we take out a mortgage in mine, my wife AND daughter's name or do we have to do in our name.

Thanks

AndrewSmith

jimmy_stewart wrote:

Just put offer in on house which has been accepted. Whilst I'm rapidly becoming quite knowledgable on the different types of mortgage we have to choose from (need to decide this weekend so look out for new post re this!) can someone clarify these apparently basic questions?

I want to borrow about £130k to buy a home for my daughter (she will contribute to the repayments). Only have £30k still owing on my home which is worth almost £200k. Looking to remortgage with new lender. Online quotes ask for value of "property". Which "property" is this? Mine or the new house? Also when it says loans of 95% (or whatever) of value again is this the new property? Just rang Nationwide and they say maximum is 95% but advice I have been given by broker is that 100% ok as the other 5% is in our equity.

Related to this does there have to be a valuation survey on the NEW house? I thought I could remortgage for any purpose so surely the question is is my own home worth what I say it is? That said I know I will have to get some kind of survey on the new home but will the lender just take my word re the value of my own home?

Finally daughter's name will be in legal document as "joint owner" based on her % of contributions to us to help pay mortgage but can we take out a mortgage in mine, my wife AND daughter's name or do we have to do in our name.

Thanks

Hi, and thanka for the post. Trust me there are no daft questions when it comes to mortgages.

Can you just clarify a few things for me?

The offer you have put in. Is that on a house for you or for your daughter?

Are you currently in employment?

Is your daughter currently in employment?

I assume you are looking to re-mortgage your current home to produce the entire purchase funds for the property for your daughter?

Have you considered a guarantor or first start mortgage?

Post back and I will see it if I can offer some more specific help

Andy

PennyPurple

Sounds to me like you are remortgaging your own house to give cash to your daughter. What she uses that cash for (buying her own house, whatever) is nothing to do with your current lender? So all the info you give to your lender should be about you?

Just my thoughts...

Regards,
Penny

AndrewSmith

PennyPurple wrote:

Sounds to me like you are remortgaging your own house to give cash to your daughter. What she uses that cash for (buying her own house, whatever) is nothing to do with your current lender? So all the info you give to your lender should be about you?

Just my thoughts...

Regards,
Penny

Not quite true, they will want to know what you are raising the money for, and can even impose conditions on the mortgage offer for it's use.

Remember, they have no obligation to 'lend' the money, it is their money therefore it has everything to do with them what it is being used for.

Andy

jimmy_stewart

Thanks for quick responses. House is for daughter. All 3 of us work and income to cover loan not an issue. Not really considered a guarantor or first start mortgage Penny. Any advantages to this?

Nationwide adamant just now they don't do 100% mortgages. While we are ok income wise would struggle to pay £5,500 deposit but can't see why we should have to given we are clearly able to meet repayments.

Wonder if tax comes into this but as contribution from daughter if mortgage in our name nowhere near covers loan repayments I guess no "profit"?

Capital gains tax down the line so better to get daughter's name on mortgage or does leagal shared agreement cover this?

Going to be a busy weekend as I haven't decided on mortgage or solicitor yet!

Thanks

AndrewSmith

jimmy_stewart wrote:

Thanks for quick responses. House is for daughter. All 3 of us work and income to cover loan not an issue. Not really considered a guarantor or first start mortgage Penny. Any advantages to this?

Nationwide adamant just now they don't do 100% mortgages. While we are ok income wise would struggle to pay £5,500 deposit but can't see why we should have to given we are clearly able to meet repayments.

Wonder if tax comes into this but as contribution from daughter if mortgage in our name nowhere near covers loan repayments I guess no "profit"?

Capital gains tax down the line so better to get daughter's name on mortgage or does leagal shared agreement cover this?

Going to be a busy weekend as I haven't decided on mortgage or solicitor yet!

Thanks

The name's Andy actually :rotfl:

With a current mortgage outstanding of £30,000 plus extra borrowing of £130,000 against your current property valued at £200,000, it would not be a 100% mortgage.

30,000 + 130,000 = 160,000

160,000 into 200,000 = 80%

It would be an 80% mortgage as the loan is secured against your 200,000 property not the 130,000 property.

Also there would be no income tax to pay as the loan is a residential mortgage on your main residence.

You are correct though when worrying about potential CGT. The only way I could think of round this would be to 'gift' the money to your daughter and have the new property purchased soley in her name. That way there would be not CGT liability as it would be her main residence. It may however instigate a potential Inheritance Tax liability as a lifetime transfer. (sliding scale of liability for 7 years after the date of the gift). You would need to take specific advice regarding this though as it is far beyond the scope of a forum, eg looking at your estate as a whole etc.

Alternatively you could stand as guarantor on a mortgage for your daughter. This way the mortgage will be in your daughter's name, secured against her own property with you simply named as guarantor. Take legal advice though before standing as guarantor to fully understand the impliations.

Another alternative is a First Start mortgage. Bristol & West for example have designed a specific product exclusively for this reason whereby they allow the applicant (your daughter) to include a parent (you) on the mortgage application form and will take your income into account. The property however willnot be deemed for tax purposes as a second property and thus will be exempt from both Income and CGT. On both of these it is possible to obtain 100% finance.

I cannot say for sure whether 100% finance is the right way to go for you both but there are the options for you.

Hope this helps



Andy

jimmy_stewart

Sorry andy!! The figures I gave werre approximates. Actual are I need to borrow £137k which pays off the £32k I owe plus £105 for new house. Therefore don't need £160k. Can I borrow the £137 in full as a straight remortgage to do all I want to do??

AndrewSmith

jimmy_stewart wrote:

Sorry andy!! The figures I gave werre approximates. Actual are I need to borrow £137k which pays off the £32k I owe plus £105 for new house. Therefore don't need £160k. Can I borrow the £137 in full as a straight remortgage to do all I want to do??

I don't see why not. As long as you have sufficient income to cover the mortgage and are fully aware of the implications of increasing your own mortgage then it should be fine (obviously depending on underwriting etc).

Andy

jimmy_stewart

Thanks again Andy. Anyone else helped children on the property ladder and if so how did you deal with the mortgage, CGT, tax issues? I'll look at the mortgages you have suggested Andy. Big decisions but as is the nature of these things viewed "dream home", offer and acceptance all in a couple of days this week and now the real headaches start!

AndrewSmith

No worries,

I'm sure withe the figures you have suggested that it will be fine.

The decision on which way you fund this will largely depend on you and your daughter. ie; what arrangement is there in place for her to repay the capital to you.

One way of looking at this may be for her to raise the capital against the property you are buying in a couple of years once she has the income to sustain the mortgage. She could then use this money to simply repay the extra mortgage you took out for her, as long as it ties in with any early redemption period imposed by the re-mortgage you are about to take. This way you will only be mortgaged to this level yourself until she has the income to take the mortgage herself.

My advice would be to ensure that you receive the correct advice on the suitability of the mortgage being recommended and don't be drawn by what may seem like a very low rate. You need something that will allow you the ability to possibly repay a large sum in a couple of years should your daughter be able to obtain a mortgage herself.

Any more help, just ask.

Cheers

Andy

missile

No disrespect to the good advice you have been given on here, but why not see a morgage broker? There are many who will be pleased to give you free advice and you may find they will get you a better deal from your current lender than is available to you doing it yourself.