FTB parents help

geordie28

Hi folks

im looking for a bit advice if i can please? i am currently saving for a deposit for my first place. im 31, earn £19000 per year, have no debt and a very good credit record. I currently have £5k saved up towards my deposit. by the time i come to buy i reckon i'll have another £3k. my dad has offered to lend me £20k to help me with my first purchase. i am looking to buy somewhere for between £80-90k. My dad does not want me to pay him back in installments but be able to pay it back in full in 5 years. doing some calculations i have seen that i can get a mortgage for £65k for 3.1%. this is with a £25k deposit. that is £300 a month-ish mortgage cost. i would like to save up partly towards the repayment to my dad and then pay the rest back from equity built up. i have estimated that over the 5 years i would have paid off about £10k towards the principle. i think i could manage to easily put away £100 a month towards part repayment which would be £6k over 5 years (more if i decide to get a lodger which right now is 50-50 but something i can always do if things get tight). i would then like to re-mortgage after 5 years and take the other £14k out of the property. of course the property price could go down but if it remained static i would still have £21k equity in a £90k property next time i mortgage.

can i ask are their any major flaws or major pitfalls to my plan that i am overlooking. can you please advise?

much appreciated

xylophone

http://www.moneywise.co.uk/home-mortgage/buying/should-you-help-your-kids-the-ladder
"Hollingworth points out that some lenders might take issue with you lending your children money, as this technically impacts their ability to afford the loan."

Remember that affording a property is more than being able to cover the mortgage.

If you wanted to take a lodger, (for example, through the rent -a - room scheme) you would have to clear it with the mortgage provider and your insurer.

geordie28

thanks for the quick reply. what i would be doing is making sure i could afford to buy without the loan from a parent. the loan is simply to make things more affordable due to a significantly better deposit. i am confident in my ability to manage money. my dad is happy to loan me the money as he will come into a lump sum and the interest rates are so low. i will check out article. cheers

Morgage_Confused

where can you get 3.1% fixed for 5 years?

apart from that i think its a good plan. its not particularly risky in any sense and in 5 years maybe dad wont want it all back either. dont save up the cash to pay dad back just lump it on the mortgage in overpayments.

at least you have saved up some of the deposit, "flash John" would just borrow it from the bank, on top of other loans. at least your being sensible.

ACG

Sorry but this wont work in the way you want.

Your effectively taking a loan to pay the deposit...therefore you may aswell just take out a higher mortgage and make the LTV higher (presumably you ant do this, which is why your looking to your dad) - no lender will allow this (as such).

What you may be able to do though is look at a guarantor mortgage, this is where you take out a mortgage and your dad will guarantee a certain percentage of that (so if you default, it falls on your dads lap so to speak).

MagicCats

Mortgage lenders don't like lent deposits, but a large percentage will accept gifted deposits subject to T&Cs. They would expect the provider of a deposit to sign away their right to claim on a property. In your case you can't do that as your Father is expecting a return from it.

geordie28

okay thanks everyone. i'll need to look up offset mortgage's lloyds do as shown in the article posted above and guarantor mortgages. would the mortgage rates differ greatly in these cases? i can certainly see both sides of the arguement and where the bank comes from in terms of lent deposits. their is a large degree of trust between myself and my dad. im certainly not looking to take him for a ride. i want to pay this all back as quick as possible. my dad has offered me this and it is not something i have asked for but it is an attractive option since the main stumbling block for first time buyers is the deposit and the cost of the mortgage would also differ quite a lot. what if me and my dad had an agreement between ourselves which was not legally binding. i.e my dad signed away any rights to the property and then father and son trust would ensure i pay him back? would the bank be satisfied with this? im thinking no with replies so far?

again thanks

also btw i will be buying at some point in the future whether that is on my own with 10%. i am patient but willing to take up this generous offer.

seven-day-weekend

Ask your Dad to give you the deposit (not lend it). Make sure the money is in a bank account with your name on. Then there should not be a problem. Our son has got a good deal on a mortgage from Santander and we have given him slightly more than this amount for his deposit and did it this way.

If you then decide in five year's time that you will give your poor old dad a gift of £20k, then that's between you and him, isn't it?

I

Beckyy

Although it's a lovely gesture, I wouldn't take the £20,000.

If you can afford to pay back £10,000 in 5 years then only borrow £10,000. You don't know if your situation is going to change in 5 years, or if you'll even be able to pay back the £10,000. Not to mention what the mortgages would be like in 5 years and whether you would be able to remortgage when you needed to.

Only borrow what you can afford, regardless of whether it's from a bank or a family member.

Best of luck!

Thrugelmir

Take a look at Lloyds Lend a Hand mortgage product.

This may be an easier way of achieving your goal.