Joint purchase with parents

ELTHBRT

Hi, I am looking for some mortgage advice please.

My wife and I are both solicitors I work full time and my wife works part time joint income circa £50k.

We are looking to purchase a property with my mum and dad.

The property is circa £350k and mum and dad will provide a deposit of circa £140k.

Therefore a mortgage will be required of £210k.

Is it possible to get a mortgage for this amount given our joint income and is it possible to get a lender to accept all four parties on the mortgage?

My mum still works her income is £22k and my dad is retired.

The only outgoing we have is a joint loan that my wife and I have of £300 per month.

Any advice gratefully received. Thank you

holly_hobby

Yes there are various lenders who permit 4 parties to be subject to the mortgage (and on the deeds), with you'll find max income mulitples allowable of - 3 & 2 & 1. I also presume you are all to reside in the property as your main residence.

Effecting the mortgage as joint tenants ( means that you are all entitled to an equal share in the property/equity). Upon the death of any of the mortgagors (borrower) their share automatically vests equally to the surviving mortgagors (and may not be bequeathed to any other individual).

Effecting the mortgage as tenants in common means that the property may be held in differing shares between the parties.

Upon the death of the mortgagor their share may be included in any will, and vested to whomever they nominate.

Turning to the mortgage itself, if the lender determines that Mum or Dads income is reqd for affordability (with a mge reqd of 210k, which is just about 4 x yourself & spouses income - it probably will) - you may well find that your max term may be restricted to that of Mums NRA - as her income is from employment, and/or that Dads (annuity ?) income, may not be accepted in its entirety).

And whether you effect the mortgage as joint tenants, or tenants in common - all mortgagors are both jointly and severally (singularly) responsible to maintain mortgage repayments.

A whole of market broker will be able to assist in sourcing the most suitable lender and mortgage product for your requreiments, and whom will also support you through the whole application process.

As an added thought please do think this out carefully, as there may be issues if you & your spouse or your in-laws want to change your "combined living" arrangements in the future - I am sure that as responsible individuals you will have already discussed all this before getting to application stage, but I though it was worth mentioning.


Hope this helps

Holy

jeannieblue

Posted a thread earlier re FSA rules etc. Couldn't these people also be turned down due to age?

holly_hobby

Haven't read your thread - but presume you are referring to Mum (currently earned income) and Dads income - which will appear to be annuity based.

I have already dealt with the fact that the max term may be restricted by Mum (unless her income in retirement is acceptable and sufficient). Dad is already retired - so either he is acceptable at application stage or not.

Re FSA lending guide- max terms in relation to age of the applicant relate to affordability during retirement, and the requirement for the lender to take suitable steps to verify both the applicants income and affordability past the applicants NRA. This has always been a requirement but the recent financial fallouts have resulted in the FSA issuing clear directives of the verification process they expect lenders to peform and evidence.

FYI -there are no actual FSA regulations barring any individual from holding/applying for a mortgage specifically due to their age - it is their affordability during retirement and the lenders OWN age critria which will determine if a mge advance is permissible or not, and whether the basis of any advance made is compliant with FSA industry guidelines.

Hope this helps

Holly

jeannieblue

Sorry to have barged in on this thread!

Holly, that info was brilliant. We were told that we wouldn't qualify 'across the board' due to FSA rules!

Will investigate further, thanks.

ELTHBRT

Hi Holy,

Thank you for your helpful post. It is good to know that there are people out there who know the ins and outs.

I think it is a positive for us that there are lenders who accept 4 borrowers. However, I am a bit concerned re the income multipliers putting together my salary circa £40k, my wife's circa £10k and my mum's circa £22k it looks like the multipliers will not stack up to the £210k mortgage we need.

Am I right in thinking that if the multipliers did stack up they may only offer an interest only mortgage for a period up until mum's NRA which is only about 5 years away?

Thank's again.

holly_hobby

Hi,

Ok - normally max lending for 4 applicant mortgage apps - are based on mulitples of the 3 & 2 of highest incomes & 1 of (1) additional applicants inc. (not all lenders who will permit 4 apps will have such maxs so it will seek & search)

In this case, its yourself and Mum whom have the highest incomes - so solely basing the app on earned income you will be restricted to a term consistent with Mums NRA.

How do Mum & Dads income in retirement look ?

I say this as you require a lender who is happy to accept 4 applicants & multi incomes, whom are also comfortable to have a mge term that excceds the older applicants NRAs, and with the source and total post retirement income suitable to support the required borrowings.

I am currently not involved in mortgage placement (now concentrating on financial compliance), but I do recall from my placement days that Yorkshire BS accepted x 4 apps, had the most gen income acceptance terms (as quoted above), and were also flexible with terms into retirement (subject or course to supporting income verification of course).

If having had a look at Mums anticipated post NRA income, you feel that together with your own and your Spouses earned income - the figs stack up - it would be worth having a chat, as stated earlier, with a whole of market broker - your 60% LTV is certainly favourable in the situation - but of course affordability and how an underwriter will view the prospect & poss income stretch (so Mum or Dads inc isn't reqd which will also free up the max term) is the key to this. Indeed as Solicitor if newly qualified (meaning your current salary is only really a starting point for your prof future), this could be an angle to pursue i.e your income will increase in accorance with your practice experience and position etc .. of course if this is the case .. but you can see how you need to present a case of this type (which is where an experienced broker will come in their own).

Obv having a mge for 5 yrs on I/O is madness - unless of course your own and your spouse incomes will be sufficient by that time to effectively take over the mortgage. (whereby you could apply for a mortgage extension based upon the new income figs & change to C&I).

It is also essential in this instance, that all parties have adequate life protection in place, for the financial protection of the others party to the mge.

The figs are certainly v tight - have you considered purchasing at a lesser price point to relieve the income/term issue ? Or is the price point indicative of the property space required, to comfortably accomodate all 4 adults ?

In any event, as I say you really need a broker on board with this (whole of market) to source the most suitable lender & product (they will be also have the contacts to bounce the enquiry off various lender BDMs (reps) with a view to having an UW agree to the proposition) and they will of course support you through the whole application process.

Hope this helps & good luck

Holly