Complicated mortgage - coudl this work?

gbgb_2

Hi there. I would welcome any pointers or advice.

My elderly mother is increasingly in need of care in the future. We would like her to move in with us in a bigger house. Essentially we are planning to sell both our existing houses and buy a single large property.

The ideal budget for the house would then be £900k, consisting of:

£300k contribution from my mother
£200k contribution from my wife and I
£400k via a mortgage.

The LTV would therefore be less than 50%. However, to justify a £400k mortgage we would need a 5x salary multiple on my income. We would, however, want the mortgage to be in three names (mine, my wife, my mother) in order that my mother retains a "stake" in the property in the event that my wife runs away from me, I die, or whatever. Neither my wife nor my mother have income that we would want to have counted in terms of the lending multiple. The mortgage would therefore be in three names but dependent upon the salary of only one individual. Credit histories of all three individuals is excellent.

The question is whether this sort of complicated arrangement with this level of gearing is likely to be considered suitable for a mortgage by a lender? Is it something that I should go through a broker for? If so, what would the typical fees be?

Are there any other considerations when getting a mortgage with your extended family?

Thanks for any advice...

herbiesjp

Hi gbgb

Welcome to the board

There are lenders that could look at this for you, however it will need careful analysis and being placed with the right lender, with the correct explanation.

I would suggest using a whole of market adviser to get this agreed for you before you start making offers on properties. You can find plenty of fee free brokers who could help.

Apart from the "will I get on with them" factor, you would need to look at possible CGT and Inhertinace tax implications. For this I would suggest tallking to a tax adviser and explaining the scenario as well

WildHaggis

Herbiesjp is correct, and addressed all the major planning and mortgage issues. I would go with a financial adviser rather than just a mortgage broker for those reasons. Perhaps the house could even be housed in a trust - though these may be expensive, and have further tax implications. The other potential issues include financial and non financial factors - the level, quality and cost of care that your mum may need, how she would integrate into 'your house' or you would integrate into hers... and how this may impact on you and your wife.

UK007BullDog

Also speak to a solicitor as to what could happen if your wife wants a divorce or when your mother dies.

How much you can borrow does not just depend on the income multiples you have but also on affordability (any other loans of any type and any other dependants, maintenance payments, etc.) and also your age as most lenders would prefer the mortgage to end at age 65. If you wanted the mortgage going over age 65 you need to be able to prove how you plan to pay the mortgage. Due to the credit crunch some lenders no longer accept the "I will work until I am 70 -75" phrase.

Good luck!

gbgb_2

Thanks very much for all the replies. It's reassuring to know that it's theoretically possible, at least!

Obviously, I don't need to look too far to find a mortgage broker . Presumably they would be able to recommend decent solicitors that could advise on the legal implications?

WildHaggis

Solicitors, and an independant financial advisor - for the estate planning.
Ask around for a personnal recommendation. Visit them first, most have a 'free initial consulatation'. For a million buck property, take your time, and make the right choices. It's not so easy to fix after the event.

poppy10_2

gbgb wrote: »

We would, however, want the mortgage to be in three names (mine, my wife, my mother) in order that my mother retains a "stake" in the property

Be very very careful with this. In the even that your mother needs to go into full-time residential care or a nursing home, her stake in the house will be used to fund that before social services will start contributing. So you could be forced to sell up and move out in order to release your mum's equity. Either that or you would have to buy your mum out of her stake and that money would then be used to fund the placement. A very risky strategy indeed.

Far better for her just to gift you the £300k for the house and just live there without owning it.
Assuming she lives for 7 years from now, this will also mean that your inheritance tax bill will be much less (compared to if she still retained a third of the property and had to pass it on to you in her will).