Parents need mortgage advice

Biker_James

Morning all

I'll be the first to admit that house buying and selling is not my forte and hope that you guys can point my parents in the right directon.

Here's what happend - dad got offered a new job with the same company he has worked for for the past 24 years but approx 100 miles from where they currently lived. Mum was keen for a new start anyway so they sold the family home and moved into rented accommodation until they could find a house that they wanted to buy. They paid off the mortgage completely and have approx £25k left in the bank. They also own another property which is mortgage free and rented out. (currently worth about £110k). Unfortunately that house has gone into negative equity (they paid £140k) so they don't want to sell it until the market improves.

Dad has only 5 years left before he can retire and will take an approx lump sump of £130k plus 2/3rds of his annual salary. (but he's paid a whopping monthly investment to get this return for his retirement).

Mum wants to buy somewhere fairly soon as she's not coping too well living in rented accommodation.

So, in conclusion, is mum able to have her own home again, how much can she spend :eek: ? - and how much could they borrow paying a mortgage of approx £750 per month ? OR ........... more to the point, would they actually get a mortgage in the current property climate ?

Guys, both parents are relatively young, presently early 50's, and both in excellent health.

Many thanks to anyone that can throw some advice would be gratefully received.

Jim

ACG

The one bit of vital info thats missing is how much are they earning?

GMS

They could look at remortgaging the rented property to raise funds for a deposit. This together with the 25k they have will mean less borrowing on the residential mortgage so access to better rates.

Are they declaring the rental income for tax?

Biker_James

ah ! - sorry about that - dad's net pay is approx £1600pcm and mum is currently not working, although she hopes to find a job fairly soon. She used to earn approx £1300pcm and would hope to find a similar job.

Jim

Biker_James

GMS wrote: »

They could look at remortgaging the rented property to raise funds for a deposit. This together with the 25k they have will mean less borrowing on the residential mortgage so access to better rates.

Are they declaring the rental income for tax?

yes - the rental income has always been declared for tax purposes

ACG

Yes then, they should be able to buy a property.
I usually work to 4x gross annual income - although it could be higher. The fact your father is paying a huge amount into a pension and theyre looking at maybe a 15 year term then i think trying to go too much more than that could be difficult.

Biker_James

ACG wrote: »

Yes then, they should be able to buy a property.
I usually work to 4x gross annual income - although it could be higher. The fact your father is paying a huge amount into a pension and theyre looking at maybe a 15 year term then i think trying to go too much more than that could be difficult.

thats good news - thank you - I think this information will now settle my mum. Do you have any idea how much they would be able to borrow ? (as a rough guide) - my dad says he doesn't want to pay any more than £750pm and a 15 year term would be more suited if not less. They also receive approx £450pcm in rental income (after tax) but would hopefully want to sell the property once the market starts to move. Would this incur capital gains tax if they sold for less than they paid ?
Cheers Jim

jonnysaving

I don't understand how the second house is in "negative equity" if it is mortgage free. Do you mean the value has dropped since they bought it and therefore their investment has gone down?

Are you including the rental income in your fathers income for this calculation?

I agree with ACG:

ACG wrote: »

Yes then, they should be able to buy a property.
I usually work to 4x gross annual income - although it could be higher. The fact your father is paying a huge amount into a pension and theyre looking at maybe a 15 year term then i think trying to go too much more than that could be difficult.

They should be fine getting the mortgage for this amount. Is it their plans to pay it off when you father receives his lump sum?

Biker_James

jonnysaving wrote: »

I don't understand how the second house is in "negative equity" if it is mortgage free. Do you mean the value has dropped since they bought it and therefore their investment has gone down?

Are you including the rental income in your fathers income for this calculation?

I agree with ACG:



They should be fine getting the mortgage for this amount. Is it their plans to pay it off when you father receives his lump sum?

I understand your thought process too, yes the house has dropped considerably in value since they bought, hence not wanting to sell at the moment. As for my father paying off the mortgage with his lump sum, i think he would prefer to sell the rented property and pay off the mortgage in full that way - although he's not too sure at the moment and he would need to seek further financial advice. Its more of a case of trying to settle my mother at the moment who is stressing on a daily basis wondering whether she'll be able to have her own home again. Giving her a bit more information and knowledge would be useful purely for the 'settlement factor' for her.
Cheers Jim

jonnysaving

You will find most lenders will have calculators on their sites to see roughly how much you will be able to borrow. You will need to take these with a pinch of salt as make quite a few assumptions but will certainly give you a starting point.

Have a read through the Mortgages section on the main site, they're really useful, and will point you in the right direction.

Other than that I would suggest visiting a mortgage broker where they will be able to talk through their circumstances in full and get a much better and broader picture of their options.

Hope this helps.

Biker_James

jonnysaving wrote: »

You will find most lenders will have calculators on their sites to see roughly how much you will be able to borrow. You will need to take these with a pinch of salt as make quite a few assumptions but will certainly give you a starting point.

Have a read through the Mortgages section on the main site, they're really useful, and will point you in the right direction.

Other than that I would suggest visiting a mortgage broker where they will be able to talk through their circumstances in full and get a much better and broader picture of their options.

Hope this helps.

Cheers mate, i'll certainly do that with them. Thanks for your advice, Jim