Mortgage Advice Please...

brettk1986

Hi,

I am currently a graduate medical student (25yrs old) with another 3 years left to study in London. I have £70k for a deposit which could be stretched to £110k if it was a deal breaker.. I have seen a two bedroom property that I would like to buy for £250k. As a student I currently have no income apart from student loan etc, but have good future prospects. My parents are willing to be guarantors for the mortgage. They are currently mortgage free however my father is 60 and is likely to be retiring next year, he will receive a pension in the region of £40k. I was just wondering if anyone in the business or those who have been in a similar situation could give me any informal advice before I start contacting brokers.

Thanks

Brett

ACG

Nobody will give you a mortgage. It doesnt matter how good your prospects are. As soon as they lend you the money, month 1 they will want you to start repaying - if you have no income you cant do it.

The best chance you have is getting a mortgage with your mum or dad (a joint mortgage).

Tony

brettk1986

I thought that might be the case.. if you have a joint application does that mean my parents would have to have an equal share of ownership on the property? This would mean my parents would be liable to capital gains tax when I came to sell in the future as it's not their main residence... i think i need to see an accountant/mortgage broker...

brettk1986

Ps... just in case it makes a difference my parents will be paying my repayments until I qualify... eg 3 years..

Thrugelmir

Wait until you qualify before purchasing a property.

At the current time its not a feasible option for you for a number of reasons.

dimbo61

Live in cheap rented properties and build up savings over the next 3 years.
House prices are not rising and may this year fall by upto 10%
Do you know where you will be working when you qualify? Lots of doctors move round to different hospitals for the first couple of years while climbing the ladder in the NHS.
When you do get a mortgage have a look at the YBS offset mortgages and " family and friends" that way mum & dad can help you

brettk1986

Thanks for the replies... it is true, i have no guarantee of being in London after 3 years time... my theory was i could always rent it out if i don't get a job in London... I'm pretty much dead set on getting the property it's too good a deal too pass up, perfect re-development opportunity... I appreciate peoples advice on not buying now etc, but i'm more interested in knowing if it is actually possible to get a mortgage or not...it seems a bit pointless to spend £18k+ on rent over 3 years when i can spend a little bit more and cover interest on a mortgage and make a tidy profit doing it up...

Thrugelmir

If you want a mortgage then you'll need an income.

Involving your retired father in such a scheme is pure folly. As there is no such thing as a guaranteed return on property.

How much interest do you expect to pay in 3 years? Let alone purchase and possibly sale fees.

brettk1986

I don't understand how my involving my father is a "folly"... he has a guaranteed income of £40k+ annual final salary pension, and is fully prepared to be the guarantor for the full mortgage of £180K for at least the three years until I have qualified. I would expect this to be in the region of £9/10k a year. My father would be insulated from any loses above this as it is my sizeable deposit that is at stake if negative equity occurs. They currently have a lending facility that they can use to finance the purchase, but it is a variable rate and I was hoping to try to get a fixed mortgage as i envisage substantial rate increases in the next 3 years. I'm not new to buying property i have already bought and renovated my first house, but I did that on a joint ownership basis with my parents and they got a little stung on capital gains. Hence my original question of whether it is possible to get a guarantor mortgage as a student if the full amount is guaranteed or something similar. I'm sorry i don't mean to be rude but i didn't ask people if they thought it was a good idea or not.

brettk1986

I'm sorry that was rude, you guys are only trying to help me out... too much sun I think...

holly_hobby

Even in the situation of a guarantor - the actual applicant needs to have sufficient income to service the loan - so at the moment thats a no go as already dealt with above.

The only alternative solution (other than jnt mge) would be to consider a buy to let (BTL) mortgage. Although some lenders don't require an earned income, instead taking the projected rental income in their affordability matrix, this would need to be in your parents name/s as you are intend to live in the property from outset. (and therefore a BTL mge application in your name wouldn't be technically accurate).

Obviously the lender will want an AST effected - and I imagine from your post that your parents won't actually be charging you rent. In that case, if the lender asks if this is the case or it is disclosed, they may want your parents own income to be sufficient to service the mge liability, instead of taking the rental income into account. (This may be further complicated by the term available in relation to their age, and income during retirement).

Ideally if the above all goes to plan, upon your entry into the workplace, and with sufficient income to service the mge reqd (and also meeting the chosen lenders underwriting criteria), the property could be "purchased" by yourself from your parents under a normal residential mortgage.

BUT - using this route WOULD incur a CGT liability for your parents, upon disposal (sale) of the property to you (which I know you are keen to avoid). This may be mitigated by their remaining annual CGT allowances at the time of sale.

The above may not be suitable for you with regards to fees, interest rates, and taxes to be incurred - but its an alternative way of looking at the problem. Other than that - as already advised, you shall need to wait until you have qualified & in suitable employment.

Hope this helps

Holly