step up mortgage

drspock

Can anybody give me more info on this type of mortgage by the Coventry building society.
It enables a first time buyer to obtain a mortgage utilising their parents income.
I am not sure exactly what they mean, ie are the parents just guarantors or do they have to put money in?
Thanks in anticipation.

Leon_W

More information can be found here..

http://www.coventrybuildingsociety.co.uk/mortgages/stepup.aspx

But to basically address your question. It would be a joint mortgage with your parents, so you would be equally liable for the payment of it. I'm not sure what you mean by "put money in". If you mean the deposit, then the lender isn't going to care where that came from. If you mean the monthly mortgage payment, then again, the lender is not going to care as long as its paid !

regards
leon

drspock

Sorry I didn't make myself clearer, I am the parent and my wife and I are looking at various ways to try and help our son get on the property ladder.
For the record we are both retired and our house is worth in the region of £200,000. We owe about £2500 which will be paid off in the next 12 months.
We considered equity release but are not 100% to sure about it, and we heve considered taking out a second mortgage on interest only terms to give him the deposit.

Leon_W

Ah !

OK I am presuming that your lad hasn't got the deposit so you will need at least a 5% deposit from somewhere.

The loan size is calculated on one of the parents income + the first time buyer so you'll need a sizeable pension income aswell to raise a large enough mortgage to buy.

One other fly in the ointment is the fact that you have to be under 85 at the end of the term so if you are retired this will limit the term of the loan.

I've come across these situations before and it has actually worked out better for clients to go down the Buy to Let route where their son/daughter has become a "tenant" but the details are too complicated to go into here unfortunately.

Ask an independent broker about your options to obtain the best advice.

All the best.

MarkyMarkD

drspock wrote:

Sorry I didn't make myself clearer, I am the parent and my wife and I are looking at various ways to try and help our son get on the property ladder.
For the record we are both retired and our house is worth in the region of £200,000. We owe about £2500 which will be paid off in the next 12 months.
We considered equity release but are not 100% to sure about it, and we heve considered taking out a second mortgage on interest only terms to give him the deposit.

In your circumstances, I'm not sure that second mortgage etc. is the way to go - you could take a further advance from your existing lender, quite possibly at a better overall cost than a second charge loan. Or you could remortgage the entire amount to draw down the extra capital - but not unless you want c.£25k for the deposit as many lenders won't lend below that amount at sensible rates.

UK007BullDog

Your son could also go for a 100% or even 125% mortgage and pay his own way.

As you are already retired living of your pension, unless it is very large, I would not touch the equity in the house. Especially an interest only mortgage means you will be paying interest on the loan which will never reduce but once you are very old the lender wants their money back. Can you then pay? Will your son pay?