Mortgage by parents

Kirstyb1987

Hello. Can someone help me please. Me and my boyfriend have been going through a mortgage application and have hit brick wall after brick wall (to many brick walls to list)

Long and short my boyfriends mum and dad have offered to take out the mortgage for us (only have £900 left to pay on current mortgage). They are going to charge is the mortgage amount and resell to us in the coming years when our circumstances change (both self employed) for the original buying price.

We are going to pay them the deposit and legal costs but my main concern is if this can be done and how easy is it to do?

Many thanks

amnblog

Lenders won't like this.

Have you been using a broker? What has your broker said?

Thrugelmir

Kirstyb1987 wrote: »

They are going to charge is the mortgage amount and resell to us in the coming years when our circumstances change (both self employed) for the original buying price.

The payment made by yourselves to the parents would constitute rent in the eyes of the tax man. So would be assessable as income in their hands.

Kirstyb1987

The deposit was a gift from my parents that we will transfer post mortgage application to my boyfriends mother and fathers application.

shireknight

Hmm sounds a bit one-sided in favour of your boyfriend to me, what if you pay half towards the mortgage for the next ten years and then split up? it wouldn't be your house it would be your boyfriends parents house so you would have no claim on any profits from it's sale in the future.

Kirstyb1987

I completely get what you mean. This has definitely crossed my mind. Unfortunetly this is something I have to deal with. We are a couple who have been together for 6 years and live 60 miles apart and cannot stand it any longer (soppy I know - but true)

I think this is something I need to think about and deal with if I go ahead.

GMS

If your boyfriends parents are raising the funds on their own property then you would effectively be a cash buyer so no issues for satisfying lenders.

If they are taking a mortgage on the new property then there are issues galore.

Which way is it?

Annisele

If they're going to take out the mortgage secured on their own house, and then buy yours for cash, then I think it might be possible (though I'm not at all sure it's a good idea).

If they're planning to secure the mortgage on the house you'll be living in, then I think it's a complete non starter. They'd need a buy-to-let mortgage, but since their son (a close relative) would be living in the house it'd have to be a regulated buy-to-let (which restricts choice). They'd have a gifted deposit from the parents of one of the tenants...and I think that would scupper the plan in itself.

And then there's the income tax issue, as Thrugelmir said. And potentially a capital gains tax issue - CGT is charged on the amount a property is worth on disposal, not necessarily the amount it's sold for.

To protect your own position, you'd probably want an option to buy the house in future at the original price - but no lender would like that one bit.

Frankly, I suspect that whatever problems you have taking out a mortgage yourself would be multiplied tenfold if your boyfriends' parents try to secure a mortgage on the place for you. (That doesn't necessarily apply if they secure the mortgage on their own home - but you still have many of the other issues).

Have you tried going through a broker?