New Build Apt Mortgage Query

Andypatterson

Hi Guys,

I'm new to this forum as I have a specific query.

I've not been avidly looking for property as I'm quite comfortable living with the parents at 24. However about a month ago I noticed that an old nursing home had been converted 10 mins down the road into a block of appartments - a beautiful location.
I went with the parents to view the place and decided that I wanted it. When first viewing it, perhaps naively as I new nothing about mortgages at that point, I assumed that 10% deposit would be adequate. The value of the property is £150k and I have £7,500 saved with the parents at the time offering to lend me the remaining £7,500. The property was mine on the condition that I could get the mortgage sorted.

Unfortunately the next month was a bit of a rollercoster - parents went on holiday the day after (of no fault of their own!) and thus I didn't have them around for advice. Plus; they were delayed for a further week because of the volcanic ashcloud!
Having spoke to a mortgage broker I was told that the best, and only, mortgage available to me was a 85% LTV with the Principality building society - problem, as I could only source the 10%.

When the parents returned we discussed this and met the mortgage broker again and the developer. We the suggested an offer - the developer to retain 5% share in the property - effectively them paying 5% deposit and me putting in the remaining 10% to make up that 15% required. The developer was happy with this; however the building society rejected it on the grounds that the 15% needed to be the buyers own resources .

As a last resort my parents kindly offered to buy 10% share and me to pay 5% deposit; however once again it doesn't look like the mortgage company would be happy as parents are on verge of retirement so won't be allowed to be named on a 25 yr mortgage.

Does anyone have any suggestions on how this could be made possible? I would only wish to proceed if parents 10% is protected - as much as can be. As I understand it they could fall victim to negative equity if the property decreases in value; thus them losing part of their investment - which I want to minimise risk on. Any other ideas? I'd want to keep their names off the mortgage deeds if possible to avoid them being liable at all.

badmoon

I'm not so hot on the financial issues so can;t help you there though I know the general advice would be keep saving until you can find that extra 5%.

Just wanted to say and I'm sorry if you think I'm pouring cold water on this, but are you sure about this apartment? Have you had a look elsewhere at other new build apartments and houses to compare with them?

Also had a look on upmystreet etc., to make sure they've got the valuation spot on?

I've absolutely nothing against new builds by the way, am in the process of buying one myself. I'd always recommend doing that kind of research first as I know from my own experience how easy it is to get carried away and fall in love with the first place you see. I did this, was all set to go but then went and looked at other places and the original paled.

Also make sure you're 100% happy you could make the repayments too, nothing worse than a millstone round your neck from the moment you move in (not being able to afford to go out etc. or make improvements/buy bits of furniture).

Sorry for not fully answering your question, just wanted to ask if you'd thought about all the other aspects.

Good luck, I really hope you can find some way round it if it's definitely the property for you.

Andypatterson

Thanks for the reply. Yea its a really nice place - I've looked at other places. But there are a number of factors that win with this place - mainly due to location a) in a rural setting which seems to be very hard to come by for apartments b) 5 mins from parents house and place i've grown up near.

For me the issue is just around how to be able to protect my parents 10% investment

Cannon_Fodder

How much haggling on price have you done? Ask the developer to reduce the price by 5%, instead of it counting as part of the deposit.

I would also echo badmoon's comments about research.

Check recent sold prices nearby, using www.houseprices.co.uk or similar.

Check what else is on the market using http://www.rightmove.co.uk/house-value.html

By all means save for 15% on top of getting a better price, as that will help the interest rate etc...

But flats have been worst hit during the price crash, so you should be in a strong negotiating position.

Andypatterson

Unfortunately there is another couple interseted in buying the place at full price but as they are part of a chain it is taking a while - which is why they are keen for me to buy. However reducing the cost makes relatively no difference to 15% deposit. i.e. if they knocked it down to £135k - i would still need to find a 15% deposit - near enough 20k . which makes relatively no difference.

getmore4less

Is there a problem with Salary?

Andypatterson

Salary is not the issue. I've been told that (based on my £30k salary) I can borrow £127,500 on a £150,000 property - thus having to provide £22,500 in deposit.

The issue being that I have £7,500 saved personally - with parents willing to help out. They are keen to make sure that their £15,000 contribution does not result in negative equity and them personally losing out.

So I am trying to think of some sort of idea to comabt this from happening - even if it means that any sort of negative equity is my problem, rahter than theres - and they would profit from any sort of positive equity.

In addition there seems to be a problem in that the mortgage lender don't like the idea of having them named on the mortgage deed (and neither am I for that matter because I don't wnat them to be liable) - because they are 60/70 and won't be named on a 25yr mortgage.

Any help/advice/opinions greatly appreciated.

azazle

have you tried the lloyds helping hand scheme or nationwide which i think may lend 90% on a new build. What debts do you have? nationwide are not that brill with high ltv mortgages if you have lots of debts.

Click here for the lloyds helping hand scheme

http://www.lloydstsb.com/savings/lend_a_hand_product_page.asp

azazle

http://www.lloydstsb.com/mortgages/lend_a_hand.asp

actually this link is more informative

Andypatterson

Hi,

Thanks for the info - these schemes sound appealing - however, the one I looked at - LLoyds TSB - mentions 25% required, rather than the 15% mentioned. Anything along the same lines would be great though.

Your help is appreciated

Annisele

Andypatterson wrote: »

I would only wish to proceed if parents 10% is protected - as much as can be. As I understand it they could fall victim to negative equity if the property decreases in value; thus them losing part of their investment - which I want to minimise risk on. Any other ideas? I'd want to keep their names off the mortgage deeds if possible to avoid them being liable at all.

Your problem is that mortgage lenders will only be interested in lending you money if they get "first charge" on the house - in other words, when it is sold the lender wants to get its money first, and then you/your parents would get what is left over after the loan to the lender is repaid. If you want to give maximum protection to your parents' 10% (i.e. if you want them to get paid first out of any house sale) then no mortgage lender will want to touch the arrangement.

If your parents want to be joint owners, then they're going to have to be named on the mortgage - which is going to be a problem given their ages.

If your parents loan you the money, the lender might be a bit iffy - in that case, the loan wouldn't be your own resources.

I think that the easiest way to get the mortgage loan would be for your parents to make you an outright gift of the 10% - but that might not be appropriate in your/their circumstances.