Mortgage and Student Loan

rob6539

Hi all, please can you help?

I'm in a very fortunate position were my parents are willing to assist a fair amount towards the down payment of a house (on the agreement that they will own that percentage of the value of property).

They have done this previously for my older brother, but used a solicitor to arrange it so that the bank wasn't aware my brother was receiving this financial assistance with the agreement of sharing the property value. Apparently the bank would increase their rates if they'd known.

My question is this; if my parents where to do the same for me, would having an outstanding student loan cause any problems? ie. would the Government consider that any large amounts of cash that pass through my name (such as a down payment) should be prioritised to paying my student loan rather than towards a house?

Sorry if I haven't worded it very well, but I would really appreciate anyones two cents.

Thank you

kingstreet

rob6539 wrote: »

They have done this previously for my older brother, but used a solicitor to arrange it so that the bank wasn't aware my brother was receiving this financial assistance with the agreement of sharing the property value

Frankly, such deception is not deserving of help. For that reason, I'm out.

Thrugelmir

kingstreet wrote: »

Frankly, such deception is not deserving of help. For that reason, I'm out.

Trust is an important part in financial transactions.Would appear that the solicitor was deceived as well.

So I'm out as well.

littlesparkles

Isn't that fraud? And isn't fraud illegal.....?

ruspat

Sorry to hijack thread a bit guys....my family doesnt really have any experience with mortgages or how student loans affect them (all our house purchases have been outright in this country, and im the first to go to university here and get a student loan) so im thinking this might be a bit similar to my situation and was hoping for some advice.

basically:

my mum and I have ~ 700k£ in savings (with maybe ~ 1/2 of it in joint accounts with me) + a mortgage free home (worth 300-400k)
Ive recently graduated and will be starting a grad job in October.

My mum is more than happy to help me out with a first home purchase, however were not too sure what the best way to go about it would be...

We were thinking she could transfer extra money to our joint accounts and then I could put down a 50 percent down payment on a house worth roughly ~250k.

However, we were also considering perhaps having her purchase the house in her name, under the assumption that shed get a better rate because she has more assets in her name (then leaving it to me the house in her will) with me paying the mortgage payments off from my salary (because she is not employed, nor has she had a job for over 30 or so years). However, were not sure if this is even a possibility due to the need to have a salary (although a bit bizarre considering we have the funds to pay the mortgage without worries)

Would either of these options be affected by the existence of student loan? i thought we could take however long we wanted to to pay that off. Is there anything illegal/fraudulent about the 2nd option? Or is the OPs case fraudulent because the parents wanted a share in the house (whilst my mum doesnt - infact were trying to transfer our assets in my name as soon as possible to avoid inheritance tax).

would appreciate any help, thank you in advance

kingstreet

ruspat wrote: »

Sorry to hijack thread a bit guys....my family doesnt really have any experience with mortgages or how student loans affect them (all our house purchases have been outright in this country, and im the first to go to university here and get a student loan) so im thinking this might be a bit similar to my situation and was hoping for some advice.

basically:

my mum and I have ~ 700k£ in savings (with maybe ~ 1/2 of it in joint accounts with me) + a mortgage free home (worth 300-400k)
Ive recently graduated and will be starting a grad job in October.

My mum is more than happy to help me out with a first home purchase, however were not too sure what the best way to go about it would be...

We were thinking she could transfer extra money to our joint accounts and then I could put down a 50 percent down payment on a house worth roughly ~250k.

However, we were also considering perhaps having her purchase the house in her name, under the assumption that shed get a better rate because she has more assets in her name (then leaving it to me the house in her will) with me paying the mortgage payments off from my salary (because she is not employed, nor has she had a job for over 30 or so years). However, were not sure if this is even a possibility due to the need to have a salary (although a bit bizarre considering we have the funds to pay the mortgage without worries)

Would either of these options be affected by the existence of student loan? i thought we could take however long we wanted to to pay that off. Is there anything illegal/fraudulent about the 2nd option? Or is the OPs case fraudulent because the parents wanted a share in the house (whilst my mum doesnt - infact were trying to transfer our assets in my name as soon as possible to avoid inheritance tax).

would appreciate any help, thank you in advance

If you have the income, you buy in your name with a mortgage in your name. If there's any element of gift in the deposit you need to declare it to the lender as such.

If it has strings attached, such as a deed of trust with some of the equity held by the donor, it should also be declared to the lender to enable them to decide if their security is compromised and their ability to repossess in the event of default weakened.

TBH with that kind of cash lying around and the inevitable tax implications, I'd buy cash if it was me.

ruspat

kingstreet wrote: »

If you have the income, you buy in your name with a mortgage in your name. If there's any element of gift in the deposit you need to declare it to the lender as such.

If it has strings attached, such as a deed of trust with some of the equity held by the donor, it should also be declared to the lender to enable them to decide if their security is compromised and their ability to repossess in the event of default weakened.

TBH with that kind of cash lying around and the inevitable tax implications, I'd buy cash if it was me.

thank you for your reply. what would be the best source of information to read up on the various (tax) implications of the various options? or is it quite a complicated matter for which we should retain a solicitor for? the reason why we wouldnt want to buy fully cash is because as I said, my mum doesnt have a job, so we have basically been living off the interest of the savings whilst trying to maintain the amount constant. we have quite a lot of expenses (especially in our home country) so if we took 250k out of that 700k, there would be a much smaller income stream coming from that (small as it is, with todays interest rates).

kingstreet

The taxation issue is simple. The amount of cash you have indicates a possible liability to higher rate tax just on the interest return on it.

This means the net return on your savings is reduced to a level where it's lower than the rate you'd get for a mortgage. In other words, the mortgage option would be more expensive. For example (rates not indicative)

£250k x 3% on savings = £7,500 x 40% tax = £4,500 net interest.

£250k x 3% mortgage = £7,500 interest payable.

The mortgage costs £3,500 more if the savings income puts you in a higher tax bracket. Even if you only pay basic rate tax, the mortgage is still more expensive, although not by as much.