Securing mortgage on parents house, options?

nick323f

Hi Guys,

We are trying to get a good remortgage deal, (we are currently on a Chelsea fixed rate of 5.79% so £700PCM). For complicated reasons we need a deal that has no early repayment charges.

Our house has an outstanding mortgage for £96,400 and is valued at £115,000.
So on our own we can only get a mortgage deal on 85%LTV

My mum has just called and made an interesting offer. She has suggested that we could use her house as a security for our mortgage. neither of us have any idea how this works.
My mums house is not mortgaged and worth about £280,000

Does anyone know what options this is likely to open for us?

Could this mean that we can use all the equity in her house and ours so apply for a 35% LTV mortgage?

Obviously I will be speaking to an independent financial advice regarding this new option. But i would appreciate any advice you guys can offer.

thanks in advance.
Nick

Thrugelmir

A guarantor will need to have the ability to pay the mortgage in the event of default not just provide security in the form of an asset.

kingstreet

You cannot secure your mortgage on her home.

She would need to take out the mortgage. She would need to be able to provide the necessary evidence of income and affordability and a have a long enough term to keep the payments affordable.

Retirement may make this a problem.

nick323f

Thrugelmir wrote: »

A guarantor will need to have the ability to pay the mortgage in the event of default not just provide security in the form of an asset.

She is retired, presumably can she use her pension as ability to pay?

Thrugelmir

nick323f wrote: »

She is retired, presumably can she use her pension as ability to pay?

Given that lenders are increasingly having to act in a responsible manner. Ask yourself whether that is a sensible suggestion?

holly_hobby

As already stated, although your Mums home has no mge on it - it belongs exclusively to your Mum - which means that it can not be used as security of any type for a mge in your name.

To access the equity in Mums house, she would need to apply for a mge in her name, based on her income, based on her age - to which she will be fully responsible for paying it. (unless she goes down the equity release lifetime mge route).

Guarantor - again Mum is assessed as a suitable guarantor, and legally responsible for paying your mge if you default.

Hope this helps

Holly

Bravehearted_2

nick323f wrote: »

She is retired, presumably can she use her pension as ability to pay?

Put your mother's pension on the line to buy a house.

Classy. Not selfish at all.

grey_gym_sock

Bravehearted wrote: »

Put your mother's pension on the line to buy a house.

Classy. Not selfish at all.

that's rather unfair ... OP's mother has voluntarily offered to help, and OP is exploring that would work ...

it probably makes sense to keep most of the mortgage on your own property. if your LTV was down to 60%, all the low LTV deals would be open to you (if you meet their other criteria). so the most that M would need to do is take out a mortgage for about £28k on her property, so that you can use that to reduce your mortgage. which may or may not be workable.