Unique situation - £80k cash but no mortgage - what to do?

Leah-Ray

Hello everyone, we seem to have quite a unique situation where we have a £80,000 cash loan from family in the USA to buy a house.

We are choosing to have me at home with our two (and potentially another on the way) children to homeschool. We currently pay £600 pm in rent and would like to escape that as it amounts to £40k per 5 years and not getting any closer to owning a home. There's a university (the first!) about to open in our small city and as such there are increasing rent prices all over the place.

We are on my husbands one income of £17,000 and have never missed rent payments but have been told that due to a default on MY account from an student overdraft which they sent the notice to pay to an old address (and we didn't get til afyter the Christmas period )- he is only able to get £20,000 mortgage. Apparently I count as a dependent also as I am not employed.

So in our area and a 10 mile radius so my husband can continue to cycle to work, we have two bedroom houses from £115,000, but ideally we would want to get a three bedroom (for five or us) so we wouldn't have to move in the next five years - so those cost 120,000 on the very cheapest end. The only things under £100k that I am finding are one or two bedroom flats with no garden access which I would hesitate to do as the kids need their run around space and are not in school.

Part buy schemes in our area for new build homes would involve us having £134,000 minimum. There are no new housing association houses being build- they did part buy but on much cheaper properties, but have not got the funding right now.

I'm wondering what you guys would do? Unfortunately our parents in the states can't act as guarantors (just because they are abroad) and for the mortgage we need to have our own savings (we have about £8k), not any of theirs as it's a gift from outside the UK and apparently that's not allowed as deposit money. This advice was all from London and Country.

Any help? Any ideas? Would you move to a bit of a rough area to get out of renting and onto the property ladder? Would you buy a cheaper place and rent it out to fund rent for your own property?

Please help. I feel we are so close to being able to get something or work something out but it's just not quite adding up.

Thanks for ANY tips you can give us on how to use what we've got best.

pleasedelete

You cant afford it. You cant afford the lifestyle that you want on the income that you have.

Are you eligible for child related benefits? £17,000 doesnt seem to be enough to bring up a family without them with £600 rent. How would any benefits be affected if you bought somewhere cheaper and rented it out? (would you lose any housing benefits etc). Having the £80k in cash will also affect benefit entitlement .You also call it a loan- how will it be repaid? House prices may fall and not go up- you need money to buy and sell.

Can you get a part time job? Not sure it would actually help as an £80k loan is not going to be acceptable for a mortgage.

Owain_Moneysaver

Is it a loan or a gift?

A loan will not be acceptable as a deposit, a gift will be, but you will have to comply with money laundering requirements to show the source of the money, and possibly get a declaration from the giver to confirm it's a gift not a loan.

And don't overlook 2-bed houses with the possibility of a loft conversion at a later date to add the third bedroom when you can afford it.

Ivana_Tinkle

Are you looking at asking prices or actual sold prices? If two beds have asking prices of £115k+ that suggests the sold prices aren't too far from what you can afford. Would you consider a real fixer-upper? We home educate our kids and have always lived in renovation projects - it's been trying at times, but we realised it was the only way we'd ever be able to afford the kind of family home we wanted.

sanel_2

Don't understand your problem if you have 80k in cash. Just get buy to let mortgage and you can surely get property for over 130k. Providing that you get a good interest rate, monthly payment shouldn't be over £300-400. Talk to mortgage broker and they will explain you that you don't have any problem but that you are in a driving seat.

Building_Surveyor

sanel wrote: »

Don't understand your problem if you have 80k in cash. Just get buy to let mortgage and you can surely get property for over 130k. Providing that you get a good interest rate, monthly payment shouldn't be over £300-400. Talk to mortgage broker and they will explain you that you don't have any problem but that you are in a driving seat.

This makes no sense???

Leah-Ray

pleasedelete wrote: »

You cant afford it. You cant afford the lifestyle that you want on the income that you have.

Are you eligible for child related benefits? £17,000 doesnt seem to be enough to bring up a family without them with £600 rent. How would any benefits be affected if you bought somewhere cheaper and rented it out? (would you lose any housing benefits etc). Having the £80k in cash will also affect benefit entitlement .You also call it a loan- how will it be repaid? House prices may fall and not go up- you need money to buy and sell.

Can you get a part time job? Not sure it would actually help as an £80k loan is not going to be acceptable for a mortgage.

A part time job makes no difference to how much we are able to borrow because of the accidental default I got. I cannot be part of the mortgage claim, just my husband.

A mortgage repayment plus repayments to my parents in law works out far less than £600 per month with the difference being saved for home repairs and additions. The mortgage repayments will come out of the same income we pay our rent and savings from now.

No we do not receive housing benefit but that figure of 17,000 includes the child tax credits my husband receives on top of his full time salary. We also save money each month for longer term expenses out of that amount. I'm not sure why you say we can't afford it when we are affording to pay our rent fine and save up for a house. Am I overlooking something else? We do live very much within our means and have no debts.

Is it not possible that we get a mortgage for the remaining amount? So we have an £8k deposit of our own, a £20k mortgage and £80k cash from parents? As it stands right now we can work it out as a gift or loan but it depends on all the laws surrounding that as to what we do.

Thanks for your help!

Jenniefour

I am slightly concerned that you are putting the cart before the horse here, because it is not at all clear to me that you are actually in a position to buy, whether that be a home for yourself and your family or a buy to let, as you mention later down in your post. And leaves me wondering whether you've had more than a 5 minute chat on the phone with the broker.

You have been advised that you need to use savings of your own for a deposit - currently 8k. You say you are going to use a loan from family in the USA for a deposit - loans from anyone/anywhere are not allowed to be used as a deposit for UK property purchases as both Owain Moneysaver and pleasedelete have stated. This applies to buy to let as well. Because it is a debt from a mortgage lenders perspective i.e. it is not yours and must be paid back. A big liability from a lenders perspective. Unless your parents-in-law are now willing to give the money to you outright and this can be evidenced. And I'm not sure what the position would be on a money gift from the USA, I can't see why not but this needs checking.

Unfortunately, what you are paying in rent has very little bearing on what a lender is willing to risk. There are lots of people out there who are renting - and paying much higher rents then they would do if only they could get a mortgage - but aren't able to buy because the lending criteria these days are stringent. Mortgage lenders are much more interested in what your outgoings are, in detail, and will need this information to be evidenced by bank statements. They will also be factoring in a possible rise in interest rates of a few percent and asking themselves if you would still be able to pay your mortgage then without running into difficulties.

Before you do anything further please get back to the broker, make sure they are in possession of the facts and go through all this thoroughly with them - in detail. Better to find out now if it's not possible to buy at present rather than be terribly disappointed later on when you've already started making plans.

Wishing you well.

BitterAndTwisted

I can't understand why someone earning £17k per annum would only be granted a 20k mortgage. Surely it's 2 1/2 or 3 times salary.

Jenniefour

BitterAndTwisted wrote: »

I can't understand why someone earning £17k per annum would only be granted a 20k mortgage. Surely it's 2 1/2 or 3 times salary.

I suspect it's a combination of a) a family of five dependent on that income, b) part of the 17k is child tax credits and c) OP has a default.

There may be an amount of salary below which mortgage lenders reduce their normal multiples.

Annisele

I suspect there's been some confusion between you and L&C about what you want, and what lenders can give you. I think you have a few issues that individually would make getting a mortgage more difficult - but put together they mean you need a good broker:

Your default. Having a default doesn't necessarily mean you can't get a mortgage - but it does mean you can't get a mortgage from some lenders. If you tell us how much it was for and when/whether it was satisfied, some brokers might be able to say more about that.

Dependents. Your husband will be able to borrow less than he would if he were single. Lenders take into account affordability, and they assume he will be spending £x per month supporting you and your children. The £x figure varies between lenders (and for a very few lenders may be zero - but those lenders might not be the ones you'd go to for the default/other issues).

The £80k. If the £80k is a loan, then it's effectively useless as a deposit. Lenders will take it into account in their affordability calculations, and decide that you can't afford to pay both an £80k loan and a mortgage on a salary of £17k. If it's a gift, and it's from a close family member of the borrower (i.e. if it's your husband's mortgage, then it comes from his parents not yours) then most lenders will be happy with it. However, the US has gift tax, so if there's an expectation of it being paid back the parents might want it documented as a loan to avoid that.

Your income. £17k really isn't much next to houses of £120k. In the circumstances, the amount you've saved yourself towards the deposit is fantastic, but it's not enough to bring the mortgage down to an affordable level. Plus, not all lenders will take tax credits into account in their income calculators.

Nationality? You haven't said anything about nationality, but since you have relatives in the US I'll chuck this in - if either of you aren't EU nationals, the lender would care about your immigration status too.

I think you should go back to the broker and have a thorough chat. Failing that, find another broker - but you might find that the combination of circumstances you have are just too hard to place.

Good luck!