Advice on helping son get on the housing ladder

JohnB47

I'm wondering if I can help my son get on the housing ladder and I don't now the latest deals available (my house is all paid up and it's a long time since I looked at mortgages). Any info would be appreciated.

e.g.

Based on him (a 28 year old) earning circa £15000 pa and me being able to help with a deposit and acting as guarantor for the loan to buy a house at around £180,000:

What is the typical 'up front' deposit needed (i.e. how much would I have to stump up)?

What would typical monthly mortgage payments be, based on a 25 year repayment mortgage.

Anything else I need to consider?

I'm only expecting broad brush replies - I realise that I need to contact a few Banks or Building Socities but I want to know if it's a non starter before I go further.

Thanks.

Yorkie1

Minimum deposit these days is usually 10%, i.e. £18K.

However, that means a mortgage of £162K. Which is 9x his salary which nobody is going to lend him.

If he was given a mortgage of 4x salary, that's £60K - leaving a deposit of £120K.

I don't know how being a guarantor would alter the equation but those are quite big figures.

BoGoF

What deposit can you put up?

brit1234

I would get him to save a big deposit over the next few years while house prices fall. Hopefully his wages can go up in that time.

He should be looking at a property no more than 4 times salary as a hedge for when interest rates go up.

A property 9-10 times salary is suicide if you could ever get the mortgage.

hcb42

that kind of lending would be impossible on his income, unless you have a deposit of 60-70%. We earn £90K between us and pay a mortgage of a similar amount, which is £1100ish on a 15 yr term at 3% so a good rate.

JohnB47

Yorkie1 wrote: »

Minimum deposit these days is usually 10%, i.e. £18K.

However, that means a mortgage of £162K. Which is 9x his salary which nobody is going to lend him.

If he was given a mortgage of 4x salary, that's £60K - leaving a deposit of £120K.

I don't know how being a guarantor would alter the equation but those are quite big figures.

Thanks everyone.

Well, that puts the kibosh on it. I could only put up £40K, unless I get a loan myself!

Seems like it's still out of reach. I wondered if prospects for first time buyers had improved recently (particularly if parents are willing to get involved) - seems not.

Thanks for the input anyway.

CautiousWithMoney

Since it is only him buying, how about a flat for 100k? He'd be able to afford a 60k mortgage, and would get a reasonable rate at that LTV. Or perhaps buying a tired terraced house in need of some work if you or your son are good at that sort of thing?

All this is immaterial if you live in London, or another very expensive area to buy in...

bodmil

Push him to get a better paying job! I'm sure you'll both appreciate it in the long run!

VT82

In a mortgage calculator, I tried a 25 year repayment mortgage at 4.5%. The monthly payment was 786.79GBP.

In a 'salary after tax and NI' calculator, I tried 15k assuming no contribution is made into a pension. The monthly income was 1,046GBP.

It wouldn't be affordable even if banks lent at the silly multiples you would be talking about.

Do you still work? Even as a guarantor you would need to demonstrate that your income would cover the mortgage, or else your guarantee wouldn't be worth anything.

If you still wanted to go down this route, you would want a 40% deposit to get your son the cheapest mortgage possible (at 60% LTV). That would mean borrowing another 32k against your own home on top of the 40k you have. You could get HSBC's BBR +1.89% rate on both, however this would only drop the initial (combined) monthly payments to 625.28GBP, or more because you would have to have a shorter term for the 32k if you are due to retire in less than 25 years. Either way, I can't see your son affording this without you paying some of the monthly payment as well.

JohnB47

VT82 wrote: »

In a mortgage calculator, I tried a 25 year repayment mortgage at 4.5%. The monthly payment was 786.79GBP.

In a 'salary after tax and NI' calculator, I tried 15k assuming no contribution is made into a pension. The monthly income was 1,046GBP.

It wouldn't be affordable even if banks lent at the silly multiples you would be talking about.

Do you still work? Even as a guarantor you would need to demonstrate that your income would cover the mortgage, or else your guarantee wouldn't be worth anything.

If you still wanted to go down this route, you would want a 40% deposit to get your son the cheapest mortgage possible (at 60% LTV). That would mean borrowing another 32k against your own home on top of the 40k you have. You could get HSBC's BBR +1.89% rate on both, however this would only drop the initial (combined) monthly payments to 625.28GBP, or more because you would have to have a shorter term for the 32k if you are due to retire in less than 25 years. Either way, I can't see your son affording this without you paying some of the monthly payment as well.

Thanks for the info everyone and to you VT82 for such a detailed response. I feel I now have all the info I need.

Cheers.

deed02392

I know the OP is satisfied but I am in a similar situation to your son. What my parents have offered to do is move out from our family home, sell to me half the house and allow me to rent out the extra rooms whilst renting my own one. I would keep the rental income and pay off both our monthly payments on the mortgage but it means that I can afford the deposit on my own mortgage and should we the house lose equity my parents would not charge me for their share of the loss.