Mortgage to allow children to help parents to buy?

marble

I'm a bit stuck, so any pointers or advice would be most appreciated. If this is better dealt with in another forum then please point me there.

My partner's parents are 65 and decided to sell the family home and move to a smaller home. This seemed a sensible idea and they've sold their house and have exchanged contracts on a smaller house. This was all going well until today.

Today my partner's father confided (somewhat upset) that because of his age/financial situation the bank would only give him a mortgage for less than the value of the new house (about £50k less). He'd also previously released the equity in the old house so that the sale of the property only gives him £30k. This means he's about £20k short of being able to buy the new property.

It's an unpleasant financial situation he finds himself in. The equity in the old house has been used to help his other sons/daughters get their foot on the housing ladder, so it's his somewhat 'foolish' generosity that has landed him in this situation, but I have a lot of sympathy (despite not being on that ladder).

Anyway, this leads me to ask for advice on what I can do?
1) My initial reaction was to end the sale of the old house and the purchase of the new house. A quick search suggests that, after exchanging contracts, this could be an expensive option. They'd lose the deposit on the new house (£15k) and open themselves to a lawsuit from the purchaser.
2) I looked in to getting a buy-to-let mortage and renting the property to them. The problem is that they're only 5 weeks from completion and I'm pretty sure I can't get the required 25% deposit in time (£37.5k).
3) I could probably (if the bank is in a good mood) lend them the £20k they're short for the purchase. It wouldn't be easy to come up with the money, but it'd be possible.

So, my question is this. Is there anything I haven't considered as an option? We rent so have nothing to secure a loan against.

For example, is it possible to somehow become a guarantor against a mortgage (where he could borrow the full £120k he needs) and in the event of something happening, we guarantee to repay the mortage until the property is sold.

Are there any 'traditional' mortgages which allow me to buy the property but not live in it. I'm not really acting as a landlord, but would probably charge a rent (though genuinely may not if that helps).

I'm struggling as everything I search for is the wrong way round ... it's all about parents helping the children to buy, rather than the children helping the parent to buy.

Any help or advice appreciated! :happyhear

mrginge

How did they exchange contracts without sufficient finance in place?

mumps

marble wrote: »

I'm a bit stuck, so any pointers or advice would be most appreciated. If this is better dealt with in another forum then please point me there.

My partner's parents are 65 and decided to sell the family home and move to a smaller home. This seemed a sensible idea and they've sold their house and have exchanged contracts on a smaller house. This was all going well until today.

Today my partner's father confided (somewhat upset) that because of his age/financial situation the bank would only give him a mortgage for less than the value of the new house (about £50k less). He'd also previously released the equity in the old house so that the sale of the property only gives him £30k. This means he's about £20k short of being able to buy the new property.

It's an unpleasant financial situation he finds himself in. The equity in the old house has been used to help his other sons/daughters get their foot on the housing ladder, so it's his somewhat 'foolish' generosity that has landed him in this situation, but I have a lot of sympathy (despite not being on that ladder).

Anyway, this leads me to ask for advice on what I can do?
1) My initial reaction was to end the sale of the old house and the purchase of the new house. A quick search suggests that, after exchanging contracts, this could be an expensive option. They'd lose the deposit on the new house (£15k) and open themselves to a lawsuit from the purchaser.
2) I looked in to getting a buy-to-let mortage and renting the property to them. The problem is that they're only 5 weeks from completion and I'm pretty sure I can't get the required 25% deposit in time (£37.5k).
3) I could probably (if the bank is in a good mood) lend them the £20k they're short for the purchase. It wouldn't be easy to come up with the money, but it'd be possible.

So, my question is this. Is there anything I haven't considered as an option? We rent so have nothing to secure a loan against.

For example, is it possible to somehow become a guarantor against a mortgage (where he could borrow the full £120k he needs) and in the event of something happening, we guarantee to repay the mortage until the property is sold.

Are there any 'traditional' mortgages which allow me to buy the property but not live in it. I'm not really acting as a landlord, but would probably charge a rent (though genuinely may not if that helps).

I'm struggling as everything I search for is the wrong way round ... it's all about parents helping the children to buy, rather than the children helping the parent to buy.

Any help or advice appreciated! :happyhear

Sorry I can't offer any advice but just wanted to say how lovely it is for you to be trying to help in this way. Hope that doesn't sound patronising but I hope my DILs and future SIL would be as nice to me.

amnblog

Are you saying his is trying to raise £120,000 on £150,000 purchase and the lender has only offered £70,000?

Has this situation changed because of the mortgage market review late last month?

Who is the lender? Did he go direct to the lender or has he used a broker?

marble

amnblog wrote: »

Are you saying his is trying to raise £120,000 on £150,000 purchase and the lender has only offered £70,000?

Has this situation changed because of the mortgage market review late last month?

Who is the lender? Did he go direct to the lender or has he used a broker?

From what I understand, the house is roughly £150k, the mortgage is for £100k, and they've only got £30k from the sale of the old house. That leaves them £20k short from completing.

The situation hasn't changed based on the market review, and I they went direct to their high street bank. The mortgage has been approved.

I've never been though the process so I couldn't say how they've managed to get this far (exchanging) without have the finance.

betmunch

Your first job is to find out if they have really exchanged, and if so how did the solicitor allow this without the funds in place.

Next job is to get a professional on the case. If you use a bank you only get their products/criteria.

Its quite possible his situation would be fine with a different lender.

Good Luck, and please keep the thread updated

marble

Thanks betmunch - we'll see what alternatives a financial advisor can offer. With three week till 'completion', it could be an interesting ride ...

marble

Well, it looks like things may have a happy ending. We took betmunch's advice and asked an IFA for advice. They were kind enough to run through some basic options but suggested there were more 'complex' options if those didn't work. They were very friendly and this advice came for free (so we're very grateful to them).

Ultimately the advice was 'speak to the bank' (which they suggested was worthwhile at this late stage before looking for other lenders). This made me a little nervous in case the bank got 'cold feet' and, knowing more money was needed, decided to somehow withdraw the offer.

Of course, the IFA was right and the bank agreed to up the mortage to 75% ... and we can cover the last couple of thousand to make the numbers add up.

So, a 'slightly' stressful week but hopefully all is ok now ... though we'll be more relaxed once completion is done and dusted.

somethingcorporate

Thanks for returning to update the thread. Nice to hear a happy ending.

marble

Oh, the happy ending is now back on ice. The bank contacted my partner's father today and said that, due to the new rules, the mortgage would have to be referred to the 'underwriters'. Apparently the mortgage was fine under the old rules but doesn't meet the new ones.

The bank did say it was hopeful since the mortgage was initially calculated under the old rules so they should be able to make an exception.

Hopefully just a formality.

marble

Well, all is sorted again now. Bank is happy and, unless there are some undiscovered skeletons, things are all sorted.

Thanks for the advice and encouragement everyone :T