Getting Mortgage with a Default & poss Capital Gains?

oliveoil54

My son has a Default on an old student overdraft, which he paid the outstanding balance over 3 years ago, but the Default must remain on his record for a further 3 years.

He & his partner are 1st time buyers, but he is having difficulty getting the big lenders to accept him due to the default, despite having an impeccable financial record since then.

His partner's salary is enough to enable them to get a mortgage in her sole name, but I am concerned that despite him investing the major share of the deposit, he would have no real legal standing if they decide on this option.

Also after the Default is removed in 3 years would she have to "re-sell" 50% of the house to my son to ensure he legally owns half of the house. Would she then be liable for Capital Gains on that "sale"? If so what would the % CG Tax or cost be on approx £88,000?
Any advice or suitable alternatives would be greatly appreciated
Thankyou

VIGILANT22

No CGT on residential property...Tell them to consult a solicitor and have a cohabitation agreement drawn up to protect each other particulaly more so if partner is buying in her name and he has majority of deposit...

oliveoil54

Thanks for your advice.

Think the cohabitation agreement is a really good idea.

But if they need to re-mortgage at a later date (ie after 3 years when Default is removed) to get my son's name on as co-owner wouldn't she have to "sell" him his share? Thats what his Mortgage Adviser suggested, & he was also told that this would be liable to CGT.

VIGILANT22

Name that advisor!!...I am just hoping it was the couple who misunderstood the advisor...it is not unusual for people to confuse information when discussing areas unknown to them....But next time they're discussing with the advisor make this a priority to clarify at the beginning of the meeting...if they still insist CGT is payable on residential....do not proceed with the meeting, find another advisor....

http://www.direct.gov.uk/en/MoneyTaxAndBenefits/Taxes/TaxOnPropertyAndRentalIncome/DG_4020890

Once your son's credit file is clean and he meets all the criteria and is accepted by the lender, a Transfer of Equity is done...means he's on the mortgage/title etc....Cohabitation agreement/Wills updated to reflect change...

Cohabitation agreement is essential...so many people don't even know it exists!

Is this a bank or whole of market advisor?

oliveoil54

Actually got the mortgage info from this web site they were listed as specialist phone brokers http://www.lcplc.co.uk/best-buys, spoke to one of their advisors who was quiet helpful & said he "thought" that my son's partner would have to effectively "sell" (gift) his share to him & that she may be liable CGT on the proportion she "sells".

Just read a little on Transfer of Equity, would they have to pay stamp duty again in these circumstances?

VIGILANT22

There is no SDLT (Stamp Duty Land Tax) relief for transactions in connection with marriage or entering into a civil partnership.

If it was my son who was buying for the fist time I would be recommending he dealt with a local whole of mortgage adviser who deals face to face and not over the phone...and particularly when an adviser said he "thought" that etc

cantgetamortgage

is a default the same as a late payment on a credit report?
Or are these 2 completely different things?
It's just that when people talk about being unable to get a mortgage they talk about being because they have a default, but late payments are rarely mentioned. Is this another name for a late payment?

VIGILANT22

On the credit report you will see all sorts of symbols a missed payment for one month appears as a 1 for 2 months as a 2 An account is normally considered in default/arrears after three months of payment delinquency.

oliveoil54

VIGILANT22 - Thanks once again for all your info and advice.

Once more this site has come up trumps with help and advice!

Have I understood you correctly in that if my son & partner re-mortgages & also do a Transfer of Equity, he would have to pay stamp duty?

VIGILANT22

oliveoil54 wrote: »

VIGILANT22 - Thanks once again for all your info and advice.

Once more this site has come up trumps with help and advice!

Have I understood you correctly in that if my son & partner re-mortgages & also do a Transfer of Equity, he would have to pay stamp duty?

The Stamp Duty Land Tax (SDLT) rules are strange....how much of a mortgage would they be having?

oliveoil54

It currently will be approx £130,000, they also have 25% deposit.