Trying to help my mum with mortgage

ashy_mashy

Earlier this month we decided to buy our council property under the right-to-buy scheme. Our terrace property was valued at £190,000 however under the right-to-buy scheme we can buy the house for £156,000.

My mum's salary is very low. I did a quick mortgage calculation on Halifax and was told we can only borrow around £30,000. I have read most of Martin's 'Guide on Mortgages' but am confused on what to do if the lenders simply won't lend us that much.

I am unsure about this but I thought we should turn to our family bank which is HSBC for mortgage: My mum has been with HSBC for 7 years with no credit problems so she has a very good record. However maybe because we have been with HSBC for so long, they may lend us the full £156,000 and maybe because they know us for so long, they may lower the rate for us. Or am I just dreaming?!

We may also be looking to move to another part of England at some point to be closer to my mum's parents so will need to sell the house. However under the right-to-buy scheme we cannot sell the house (to keep full discount) for 5 years. We were thus thinking of selling the house after 5 years and make our move. So we thought the best option would be to go for an interest only mortgage over a period of 5 years and then sell the house after 5 years to pay off the money owed to the lender. Is this a wise decision or is there a better approach?

Thanks

Cara79

Hi there

Well I don't know too much about right to buy, but with regards to going to your family bank, they will only lend either on an affordability basis or a subject to the salary.

What are the figures you are looking at?

- how much deposit would you have to put down?
- what is your mum's salary?
- would you be prepared to include your salary and be on the mortgage?

Only you will be able to decide if it is worth buying a house on interest only with the view of selling in 5 years. Who knows where interest rates will be and what house prices will be.

x

ashy_mashy

Thanks Cara, (could you explain what you mean by "would you be prepared to include your salary and be on the mortgage?")

As I said, my mum's salary is very low. I am not sure how much deposit we can put down but I thought the way in which it worked is that the lender would give us the full value and if one does not pay it, the lender sells the house in order to gather the money owed to them. But I do not understand why when I searched on Halifax I was told we could not borrow more than £30,000. I guess my question is:

How does the borrower's salary relate to the mortgage? Why does it relate at all since if worse comes, the lender will have ownership of the house and will sell it and make the money owed which is independent of the salary...??

KTF

They want to make sure you can afford the repayments. Most banks will lend 2-3 times a single income or 2.5 times a joint. Some lend more but you might not get a low rate as a result.

A mortgage isnt an interest free loan that gets paid back when the bank repossesses your house. Its like any other loan (you borrow a sum over x months which is paid back month by month + interest) except its over a long period of time and secured against the property. This is because if you cant pay it back yourself the bank can get its money 'back' by selling the house in a worst case scenario.

If your income is zero and you have a big mortgage then how are you going to pay it each month (and in turn how are the bank going to get their money back)? This is why they only lend what they think you will be able to repay.

If your mums salary is low and yours is high and if you are prepared to put your name on the mortgage as well then your income will be considered and they might lend you more (depending on what your income is).

Labman_2

From what you have said your Mum clearly cannot afford a mortgage of £156,000 on her salary. A Lender would be irresponsible in giving your Mum that amount. I'm guessing your Mum's salary is around £10-12,000 gross & I estimate that repayments on 156k loan alonewould be more than that, never minf all her other outgoings. You have to be able to demonstrate that you can afford repay the loan at the outset in order to get the loan.