Buying a house with parents - what are the options?

allotmentprincess

I'm hoping to buy a house or flat in the next six months. My income is not very high (approx £18k) and I could go for a section 106 flat locally and get a mortgage on my own. However I'm thinking more long-term and would like to get a small house with garden if possible.

These are all around the £100k-£120k mark, though the market seems slow and offers under the asking price are definitely possible. Obviously I am not going to be able to borrow anything approaching £100k, but my parents are keen to help out.

The problem is they are both in their late sixties and therefore do not qualify for guarantor mortgages, or at least none that I can find. They paid off their mortgage over a decade ago and their house is worth £500k.

Can anyone tell me what options I have regarding a charge on their house, offset mortgages etc? They wouldn't want to be lumbered with another mortgage if by some chance they could get one.

I will be seeing a mortgage broker in the next few months but I wanted to be armed with as much info as possible. Financially I am very cautious and do not want to overstretch myself at all!

Thank you.

steeeb

Do they have money to gift some of a deposit to you to allow you to borrow more (If they die within 7 years it'll be due inheritance tax)? Can you stay and save up more?

Have you done a budget as to how much you can afford.

There are reasons bank will only allow you so much - if your parents are guarantors do you want them to then worry and have to bail you out and even be forced out of there home because of it once you realise you can't afford it.

Do your parents want to downsize or stay where they are? They could downsize and buy you somewhere and see you enjoy it before they go if that is what they want. (Do you have any other brothers/sisters).

allotmentprincess

Thanks for replying. I have no intention of borrowing more than I can realistically afford - I am very careful with money and if god forbid I was made redundant I'd take on any job I could to be able to keep paying the mortgage. I also intend to take on a lodger if I get a two-bed place, though I appreciate that there is no guarantee of finding someone suitable.

I have done several budgets taking into account utility bills, living expenses, B&C insurance, putting money aside to cover emergencies etc, hence knowing the upper limit of what I am able to afford (and what lenders may realistically lend me).

They have no intention of downsizing at the moment, though that may change in five or so years' time. My brother lives with them at the moment.

It is my parents who are suggesting I look at larger places by the way, not me pushing for them to lend me more. I'm moving to start a new job, so staying put is not an option.

allotmentprincess

PS I'm seeing them this weekend to discuss finances and to find out how much they might be able to put down as a deposit. I imagine they would treat it as a gift.

averageish

A good broker is well worth their fee. I had a similar situation to the one you're in and I managed, purely by chance, to find a broker who really went the extra mile.

I don't think I'm allowed to publish their name, but if you want it, I'm happy to PM you.

StuC75

Explain to them with your budget information how your decisions are likely to be impacted by the modest 18k earnings..

With a bigger property would come increase living costs. If you take in a lodger to help ends meet, then you are essentially having a smaller place (by foregoing some of that space that you spent more to have), plus would you really want someone else living there...

allotmentprincess wrote: »

It is my parents who are suggesting I look at larger places by the way, not me pushing for them to lend me more. I'm moving to start a new job, so staying put is not an option.

Yorkie1

Bear in mind that lodger income won't be taken into account when you apply for a mortgage, so the affordability test will be done on your income alone.

kidmugsy

Have a look at National Counties BS - they are taking an interest in family house-buying.

UPDATE: here we are.
http://www.ncbs.co.uk/Aboutus/LatestNews/Family_Building_Society_website.aspx

allotmentprincess

Thanks all!

Averageish - yes please!

Stu75 - that thought has very much crossed my mind - is there any point in me getting a bigger place when the only benefit I'd get from it is having a garden, as the spare room would be taken up by a lodger. That said, I would hope to still be paying a mortgage amount that is within budget and therefore negate the need for a lodger, but it depends on how much my parents would be able to put in. At the end of the day it's the lenders who'll decide how much we can raise, not me or my parents!

Kidmugsy - thank you, that's very useful.

lonestarfan

If I had my chance again I would now always choose a 1 or 2 bed tiny freehold house over a flat.
The problems I had with a flat is they are leasehold and they have a managing agent who seem to take a lot of money for every single issue mentioned in the lease. Plus there's the ground rent and the service charge.
I didn't seem to go a week without a getting a letter from the managing agent for one reason or another. I wish I'd known that when I bought it. I'll always choose a house now even if it's small.

allotmentprincess

Ideally I would love to do that, but the price difference between flats and houses where I'm looking is what's making them most likely unaffordable. It's really tricky. There are cheaper places further out but then I have higher travel costs (and wouldn't be anywhere near friends). Tricky!