Mortgage for mother

samewens

Hi all,

My mum is 55 and is currently going through a divorce settlement with my father. She is self employed and probably earns £9k a year My father at the moment pays all her bills, and the mortgage on her current house.

When the divorce is finalised, the existing home will need to be put on the market, and once it sells, she would get approx £180K in cash once the existing mortgage is paid off by the proceeds.

Given her circumstances, and given she doesn't earn a huge amount, if she wanted to buy a new house, herself for, say £200K, would she be able to get a small mortgage, of £25K? And if so what would her monthly repayments be?

Alternatively, I, myself currently rent, and am looking to buy a house as a first time buyer within the next year. I will have no issues getting mortgage as I have a good income and a decent sized deposit. If I were to get a mortgage on behalf of her, and as such, have some equity in her new property, how much would that then impact my borrowing ability when I come to wanting to buy?

She is concerned at the moment, that the houses she is looking at, and where she has her heart set on living, are out of her price range given the anticipated proceeds from the current home.

Any help is much appreciated.

opinions4u

£9k a year?

How could she afford the bills after paying a mortgage?

She is concerned at the moment, that the houses she is looking at, and where she has her heart set on living, are out of her price range given the anticipated proceeds from the current home.

Perhaps a cheaper house and the security of a few thousand in the bank would be wise.

She might actually get a mortgage, but £25k over 10 years at 5% would cost around £270pm.

http://www.bbc.co.uk/homes/property/mortgagecalculator.shtml

My big concern is that a big maintenance bill could ruin her financially.

If I were to get a mortgage on behalf of her, and as such, have some equity in her new property, how much would that then impact my borrowing ability when I come to wanting to buy?

You open up potential issues of Captial Gains Tax doing this. You will also reduce your opportunity to raise a mortgage for your own property in your own life. Some lenders would simply turn you away. Most would sharply reduce the amount they would lend you. Bad idea.

samewens

Assuming the divorce settles as planned, she will also be getting £9K "maintenance" a year (approximately) from my father, so would that also contribute to her income when a mortgage provider looked at it? That would be contractual, whereas her income as a self employed person is less certain, given it is her own gardening business, so is subject to more variables.

Thanks for the advice on my own position....I think I will stay well clear of that!

holly_hobby

The maintenance payment would need to be by court order for consideration.

With regards to entering into a mortgage with Mum - yes its possible - but as already stated you do open yourself to CGT on disposal (the amount of which will be determined by whether you had ever lived in the propety as a main residence, at any time pre-disposal, amended by applicable allowances relating to the noted circs).

With regards to seeking a mortgage, sourcing a lender won't necessarily be an issue, but it will be rather negated by the fact that your income shall need to be sufficient to service both the mge on Mums home and your own - so it will greatly reduce your borrowing power. (this is because you will not qualify for a let to buy mortgage, due to the fact that the property with the existing mge and Mum living there is not let).

How about considering a lower priced property or Mum retaining her capital and going into rented instead ?

Holly

samewens

The property will never be my main residence, and I will never live there.

My income is sufficient to pay for both mortgages, but as you say, would reduce my borrowing power. However, would there be scope to get round this, by having an agreement in place that she would pay me the monthly mortgage cost, or could I even charge her rent that would cover the mortgage monthly cost?

Not sure I understand the let to buy mortgage point. I would have thought that the property with the existing mortgage is largely irrelevant, given the outstanding debt will be paid off following the sale of it?

Renting may be an option, or even a lower priced property. I guess I am just trying to explore the options for her.

The maintenance would be agreed in a consent order and so would be guaranteed. Without knowing much about mortgages, could there be a scenario whereby I could act as a guarantor for the mortgage, and therefore, not be impacted myself when it comes to my own borrowing, but give the lender comfort that if my Mum was unable to meet the monthly repayments, I would cover them?

The other point to note, is that as soon as she hits 60, and becomes entitled to draw her pension, she would also receive a lump sum in the region of £50K. Would that affect her own mortgage application at all?

Thanks

Sam

knightstyle

We have been looking at mortgages now we are retired and if you use the mortgage calculators on this site and money supermarket they are good. Mortgages must end before she is 70 and I would think her best bet is to go for interest only with the pension lump sum as repayment vehicle. If her income is not sufficient then an agreement from you to supplement her income would be better paid direct to her from the mortgage company's point of view but not sure of the tax implications.

Wh05apk

Potentially a mortgage could be possible, most lenders accept maintenance, some need court orders, some need to see it has been paid for a certain time.

Term wise, although most lenders will only go to 70/75 some will go beyond, although if your mum is a gardner, realistically she will not want to work beyond 70?

IF she will be getting a pension lump sum, then as has been said, that could be used to keep costs down now, by taking an interest only mortgage