Desperate Mortgage Advice Needed

Haydn_26

Thanks everyone, I have managed to make this extremely complicated. I've also used incorrect terminology. Just spoken to my parents and here is what's happening. They BOTH are agreeing to sell the house at 100k, home valued at 150k. Apparently this is called a concessionary purchase where the difference in equity makes up the deposit. My dad would move out and my mum remain, some lenders allow this some don't apparently. My dad has agreed to clear my debts before we apply. Hope this makes more sense. My brain hurts

Pixie5740

Supposing you were able to get a mortgage, are you planning to live in the property with your mum?

Haydn_26

Yes she would live me. My broker says some lenders do allow this

Haydn_26

This has come from Natwest. Opinions?

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We accept transactions under value where the applicant is receiving a gift of equity from a family member with a deed of gift to represent the amounts The maximum loan can be based on the valuation not the purchase price The applicant may need to have an indemnity set up via their own solicitor, even when the money is advanced against a formal loan agreement or a second charge is put in place to secure the family member’s rights There is no lower limit on the LTV applicable We commonly see cases where the family member gifting the equity continues to live in the property – this is OK provided that no rent is being paid

Irratus_Rusticus

Hi, seems to me you have already out-knowledged the average punter's understanding by your own research. Me anyway. It must be a difficult time what with your parents divorcing and the family home needing to be sold, so fully understandable desire (excellent in circumstances) that all concerned want to hand the home on to you.

As I understand it:

House valued at £150K. A mortgage provider valuation? If yes, even clearer as actual mortgage offer would be calculated on LTV with V being the mortgage company's valuation.

Parents agreeing to sell to you for £100K = gift of equity in lieu of deposit, as you have confirmed with Nat West at least, so presumably you have £50K deposit assuming £150K is the provider's valuation too.

Somebody has affordability-approved up to £115K and your father will remove your debts.

You can presently afford £500 pm mortgage payments (if debt free). What does this buy you in theory?

Using -PMT(rate%/12;Amount;mnths repaying;0;0), a 'stress test' affordability for £100K at 6% over 25 years would need £644pm while £115K would need £741pm.

Any initial lower rated product would of course be temporary relief against base rate increasing to 6%. How likely or when 6% will be reached is anybody's guess.

Assuming a 25 yr term, £500 pm would buy you an initial five year fix up to 3.5% on £100K, or 2.2% on £115K with need to buy a new product after initial period ends. Then there are any product and legal fees.

In the end it is what you can realistically afford and what somebody will lend. If the mortgage provider is happy to treat the gift of equity as a deposit (whatever the final valuation) and they are willing to lend and you can afford it, mum can live with you as can your gerbil and aged aunt.

Seems worth trying to make the deal given favourable circumstances but only if the numbers truly stack up. Good luck getting a mortgage.

patanne

What happens if you marry or worse divorce - speak to a solicitor. It is not just about the mortgage, it is about what CAN happen in the future. Everybodies back needs to be covered, especially your mother who unlike your father seems to be giving up an awful lot.

Put it another way - your father is getting HIS equity - you are getting your mother's - what does SHE get out of this.

Haydn_26

My mum agrees that she will let go of her share in order for me to buy the house. We need to find a lender that will allow her to remain in the property on sale.

Haydn_26

On the flip side for her should remain in the family home and live rent free.

Pixie5740

Your mum will have no security though. If you want to sell the property further down the line or get married to someone who doesn't get along with your mum she will be in a very vulnerable position. Still she's a big girl and should seek her own legal advice.

As for finding a lender you really need to engage a mortgage broker to see if it's even possible for you to go ahead with the purchase otherwise it's all a big moot.

Haydn_26

We all understand the possibilities and we are meeting our broker next week. My dad said we could setup a trust whereby if we sell the house she would receive X amount. Again this would have to go through all relevant legal processes. This is an area I have virtually no knowledge on