Getting a mortgage after purchasing parents house as investment

danyboy · 8 November 2013 at 6:59PM

Hi all, advice needed: my brother and I purchased my mums council house straight out of Uni, but I am now married and looking to purchase my own house with the wife. We have £58k left on the mortgage - I'm paying £170/month, and I was just told by a building society that they would not, in any circumstance, give me a mortgage for my new home as long as I am named on the current one.

My question is: do many building socieitites work this way, or would banks be different? I can't make head nor tale of the websites, and going into the weekend we would like to know our next move. We are only looking for twice our combined wage for a mortgage (£65k earnings and £110k mortgage) but are a bit nervous as the wife has no real credit history (but no bad history either).

Thanks in advance, Dan.

leveller2911 · 8 November 2013 at 7:08PM

Why don't you sell your mothers house and use the equity as a deposit for your next[STRIKE] investment[/STRIKE] house?

danyboy · 8 November 2013 at 7:22PM

A small detail I left out! They are alive and well and living there! I think if we were renting that out there would not be a problem...?

leveller2911 · 8 November 2013 at 7:28PM

danyboy wrote: »

A small detail I left out! They are alive and well
and living there! I think if we were renting that out there would not be a
problem...?

I'm sure the mortgage advisors will be along shortly to enlighten you.. I take it your mother is on the mortgage as she(tenant) will be the one who qualified to buy the council house.

danyboy · 8 November 2013 at 7:45PM

Yeah, my dad and bro are on it (my bro pays the bulk as he lives there too), but the building society claimed that they would not give a mortgage if you already were named on one already, full stop! Got me a bit worried, I hope banks aren't as strict?

GMS · 8 November 2013 at 8:33PM

What percentage deposit do you have for the new purchase?

There are lenders who would consider a second mortgage subject to affordability.

A broker may be useful here.

holly_hobby · 8 November 2013 at 8:41PM

Hi,

The issue is that as you are named on the mortgage you are fully and singularly liable for the mge debt.

That means that the mortgage payment (as a straight residential arrangement ie not BTL) will be taken into account within your own affordability assessment for your own home, even if you don't physically pay any or only some of the mge monthly payment.

Such issues should all really have been explained to you by the mge broker whom arranged the original RTB mortgage BEFORE you elected to be party to the RTB exercise.

As it stands, the current bsociety you have approached (who ?), may have a conservative affordability assessment, which is why you are coming in well short of the reqd amount, and hence their comment that whilst you remain party to the current mge you're scuppered as to regards applying with them. Even if you charge your parents rent, you cant include this unless you have a regulated BTL mortgage (which I doubt you have), and as such the income must also be declared to HMRC with several yrs of available SA302s provided, to prove what you've actually declared as income for tax purposes ..... so I'm guessing the rent solution you're thinking of will be out for several reasons.

So, as it stands you've been declined on affordability. This won't necessarily be the case will all lenders, and I would suggest taking a copy of your credit record, and details of all current commitments (inc the existing mge and lender) to a whole of market broker. They'll have a look at the figs, your deposit (circa 15% for a 2nd property) and status and determine whom will be the best lender to approach to obtain the most suitable solution.

PLEASE DO NOT CONTINUE MAKING SPURIOUS APPLICATIONS WILLY NILLY TO ANY MORE LENDERS - as racking up credit searches in a short space will do no end of harm to your application with any credit scoring lender you may approach.

I can't promise you'll get what you need, it'll all come down to the figs - and your broker.

The other solution would be for you to be released from the current mortgage (via a transfer of equity), leaving the other mortgagors (status/income permitting) to continue with the mge, leaving you free to apply for your own mge without this as an added complication.

Hope this helps

Good luck ..

Holly x

danyboy · 30 March 2015 at 1:23PM

Thanks Holly, a long time in getting back but I forgot about the post during my mortgage dealings!!

An update in case anyone else is in the same boat: As we were keen to get this particular house, and the seller was keen for some cash, we agreed to a 6 month rental in Jan 2014 which would freeze the house price and give us first choice within this period to buy it. A bit of a risk but we were renting elsewhere anyway.

In March 2014 I accidentally got talking to someone in my personal bank (Bank of Ireland - we are in NI) about my situation, and they basically said: "That will be no problem, as you have been with us for 15 years and we can see your full credit history".

I was sceptical but made an appointment anyway, and they filled out their affordablilty calculator / application form in front of me, and offered us 75k more than we we looking for! The process from then on was smooth, they also only required a 10% deposit which we had good to go, and we had the house by the summer.

So I guess the moral is to try your current bank (I avoided them initially due to a few people's advice, which turned out to be false) and they will be much more flexible, if you have a good history with them.

Thanks all for your help!