Can I stand guarantor for daughter's mortgage

Poplars_2

Hi, can anyone advise. Is it possible for me to stand guarantor to help my daughter get a mortgage? The situation is I bought a house in Liverpool when she went up to University. She has lived in the house ever since - 7 years now and would like to take over the mortgage from me but has never managed to secure a permanent full time job. Unemployment is high and most jobs in the area seem to be short term. At times she has had 4 or 5 part time jobs at the same time but nothing permanent. The mortgage is only about £60k and I am not looking to make a profit out of the house but would like to somehow pass it all over to her. The house is worth about £70k. I'd be grateful for any ideas.

Thrugelmir

Your daughter will still need to meet lenders requirements in her own right to obtain a mortgage. On the whole guarantors for mortgages aren't widely accepted.

holly_hobby

The lender would look for a time frame within which you could be discharged as a guarantor - typically they are for circs where the child is a newly qualified professional, whose income will steadily climb in line with their experience (i.e - newly qualified Drs, Solicitors, Barristers, Dentists etc, etc ... you get the general idea).

As it stands, I would be surprised if you were able to secure a guarantor mortgage based on what you have stated - you must also understand that if she were unable to service the mge (and on temp jobs she's already on shifting sands), the lender will look to you to maintain the payments.

If having her recognised within the property ownership is your aim, you could look to effect a Transfer of Equity (TOE) with her to become a joint mortgagor with you (assuming your income is still sufficient to svc the mge)- obv she would also be subject to the lenders full underwriting checks. TOE fee, circa £400 & lenders admin fee, and any HMRC implications re SDLT (her) and CGT implications (you) as a result of the TOE.

However, if doing so she becomes a legal owner with rights of equity, ownership and all it brings - which you may not wish to expose yourself to as a joint owner.

If you wish to sound out any of the above, a decent whole of market broker will quickly determine your options and advise accordingly.

Hope this helps

Holly

getmore4less

Is she paying the mortgage? (even indirectly through rent)

Ever missed a payment?

Poplars_2

getmore4less wrote: »

Is she paying the mortgage? (even indirectly through rent)

Ever missed a payment?

She does pay me but not officially - I couldn't really prove that. I realise we should have made the rent situation formal but we expected to sell when she graduated. didn't anticipate her love of Liverpool or the recession which means the house initially lost value.

I trust her to pay and if she couldn't I can afford to pay it. I would just like it to be hers.

holly_hobby

Don't worry, even if you could prove she was paying rent or the mge via you & your bank account - that would hold no weight in respect of a mortgage application and the actual assessment for servicing of the mge (which is based on income only (inc permitted unearned income such as some benefits/trust/investment income ).

NB - you should be declaring the income via annual assessment to HMRC, even if you make no profit from the arrangement, and officially speaking your mge lender should be aware, if not already, that the property is effectively let to your Daughter, with suitable blds ins effected for a let residence.

Solution to recognise your wish for her legal ownership would be (as already discussed), effect a TOE, or a will (if she fails lenders criteria), both options with additional life protection on at least you. You should consider a term assurance policy (written in trust) in respect of the mge debt (and regardless of how the property is held), to facilitate your wish for the property to be passed to your Daughter presently or via your will on death. Without her own income being an issue in maintaining any jnt mortgage, or having to sell the property if she is unable to secure a mge under her own steam to redeem your current borrowings,, following your death and any remaining os mge on the property at that time.

As stated, an experienced broker will make short work of sourcing a solution for you (if poss given your personal & fin circs) - and support you throughout the application process and beyond.

Hope this helps

Holly

Thrugelmir

Poplars wrote: »

She does pay me but not officially - I couldn't really prove that. I realise we should have made the rent situation formal

So the "income" isn't being declared to the HMRC?

This is a problem which needs resolving. As penalties for non-declaration will compound.