Only need £40k to buy house... Is there a non mortgage option?

christofurriebum

Hi All,

I find myself in a bit of an odd position. Good, but quite unusual (for me anyway).

My parents have moved from our 4 Bed Detached house, into their new 2 bed semi in a better area (to retire in). I am living here, taking care of the place (http://this-house.org.uk), while it is being sold.

Their plan is to use the funds from the sale of this house, to: -

1/ pay off the mortgage on their new home
2/ provide a nest-egg for their retirement
3/ fund (or part-fund) the pruchase of a house for me

They'd prefer to see their kids benefit from their legacy, before they pop their clogs. I can only agree with that! :j

Now, in our area (I don't fancy moving too far out of it, as I do like to stay in touch with my Mum & Dad, so I can keep an eye on (look after) them), the sort of property I was looking at for myself, would be about £180,000.

I'm told that the figure I should expect to see from Mum & Dad is in the region of £140,000 which is pretty awesome.

So, I'm looking at a £40,000 mortgage... But wait... Is that my best/only option?

Whatever house we would be buying, it would be jointly, as tennents-in-law (I think). They wanted to do this, so that I can't get shafted again, by another shameless gold-digger (I have been stripped clean and divorced).

I get the feeling that getting a mortgage on these terms might possibly be a little difficult or perhaps... complicated. I wonder if you guys & gals would be able to suggest alternatives, that might be available to me.

Though I have had a couple of mortgages in the past, I would rate myself as inexperienced in the money borrowing arena.

I guess that any loan I am likely to get, would be much more expensive than a mortgage - is that right?

Here's what I've thought about so far: -

1/ A mortgage from someone who will allow me to overpay with no penalties. Previously, I had one with The Skipton Building Society. I liked them. They have a funky mortgage estimator thingy: http://www.skipton.co.uk/mortgages/calculators/interactiveMortgageCalc.asp

2/ An unsecured loan - I have not looked into this really, as it scares me a bit.

I'd love to have the £40k *before* I get the house, as this would probably make any purchase much smoother, but I'm unlikely to get a standard mortgage, on those terms.

Any ideas?

Cheers,
--

ChrisP

Debt_Free_Chick

christofurriebum wrote:

I guess that any loan I am likely to get, would be much more expensive than a mortgage - is that right?

Almost certainly

Here's what I've thought about so far: -

1/ A mortgage from someone who will allow me to overpay with no penalties. Previously, I had one with The Skipton Building Society. I liked them. They have a funky mortgage estimator thingy: http://www.skipton.co.uk/mortgages/calculators/interactiveMortgageCalc.asp

Now I'm confused You thought that getting a mortgage would be difficult, but I'm not sure why. Is it due to the Tenants in Common issue? If so, then that is not a problem, but it depends on the proportion of the property you would own. If you are to own £40k worth on day one (which is roughly 22% of the value) then you - as one of the owners - need a 100% mortgage. I assume you have nothing to offer as a deposit? If that's not true, then put down a deposit to avoid having to borrow 100% of your share.

And then .. if overpaying is important to you, look for a flexible mortgage to allow overpayments.

I assume your income will support a mortgage of (up to) £40k?

2/ An unsecured loan - I have not looked into this really, as it scares me a bit.

Not sure why it scares you - an unsecured loan does not tie the property into the debt. However, unsecured loans are not generally available for amounts in excess of £25k (as the consumer credit regulations only apply to loans up to £25k).

I'd love to have the £40k *before* I get the house, as this would probably make any purchase much smoother, but I'm unlikely to get a standard mortgage, on those terms.

It's not clear why not - would you care to elaborate?

Cheers

Debt_Free_Chick

christofurriebum wrote:

Whatever house we would be buying, it would be jointly, as tennents-in-law (I think). They wanted to do this, so that I can't get shafted again, by another shameless gold-digger (I have been stripped clean and divorced).

Being tenants in common with your parents will NOT prevent and future spouse having a claim on YOUR share of the property. As you will own 22% of the value, then any future spouse potentially has a claim on that 22% - although they would (probably) have no claim on your parents share.

christofurriebum

Debt_Free_Chick wrote:

I assume your income will support a mortgage of (up to) £40k?

Yeah, I'm on £20,500
(+ a regular additional amount that I chose not to rely on)

I wrote: -
I'd love to have the £40k *before* I get the house, as this would probably make any purchase much smoother, but I'm unlikely to get a standard mortgage, on those terms.

Debt_Free_Chick wrote:

It's not clear why not - would you care to elaborate?

The sooner I get the mortgage, the sooner I can get on with paying it off

However, what mortgage company will lend me £40k, without having a physical property to offset against the risk? If this is indeed possible, I'd jump at it.

herbiesjp

christofurriebum wrote:

However, what mortgage company will lend me £40k, without having a physical property to offset against the risk? If this is indeed possible, I'd jump at it.

None - the lender will want first charge on the property

Debt_Free_Chick

christofurriebum wrote:

Yeah, I'm on £20,500
(+ a regular additional amount that I chose not to rely on)

I wrote: -
I'd love to have the £40k *before* I get the house, as this would probably make any purchase much smoother, but I'm unlikely to get a standard mortgage, on those terms.

Most of us are in the same position when we buy. Firstly, you need "a mortgage offer, in principle". This means that you shop around, then approach a lender and see if they will lend you £40k for your share of a jointly owned property. You shouldn't find too many problems here as it's not an uncommon situation. You then make the formal application once the sale is ready to go through. The funds will be with your solicitor ready to complete on the purchase.

The sooner I get the mortgage, the sooner I can get on with paying it off

If timing is an issue, then simply start saving now.

However, what mortgage company will lend me £40k, without having a physical property to offset against the risk? If this is indeed possible, I'd jump at it.

But there will be a physical property ... it's just that you've not identified it yet

I really can't see any difficulty in what you're proposing - it has all the features of any normal house purchase :j

christofurriebum

Thanks for your responses.

Cheers!

black-saturn

You could always get your parents to let the property to you, therefore they use that to pay the mortgage and then they could leave the property to you in their will.

christofurriebum

they can't afford any more than the £140k & I have expensive taste in location

I think a normal mortgage is what I need to go with.