Parent helping FTB - extra stamp duty

SarahBHC

Hi,
My husband is currently helping his son get on to the property ladder. He is helping with a 10% deposit and is going as guarantor on the mortgage (as his son is a relatively low earner and doesn't meet affordability in his own right) and will be helping a little each month with repayments, reducing over time as his son's earnings increase. My husband is gifting this money to his son and does not want a share in the house. The aim is for his son to then take over the mortgage in his own right once he meets affordability. My husband is mortgage free.
They are going through Virgin Money for this mortgage, as they seem to be one of very few lenders who do guarantor mortgages at decent rates and lend up to 75 years old. Originally when our Broker enquired, VM said my husband would not need to be on the property deeds. Now that we are going through application, they have said my husband does need to be on the deeds.
We believe that this will now lead to my husband and his son having to pay the extra stamp duty, due to my husband owning his house, regardless of the fact that he does not want a share in the property and his son is a first time buyer.
Is anyone able to confirm please?
Thanks in advance!

kingstreet

It's right.

If he becomes owner, it will fall foul of the second property rules and the SDLT surcharge will apply.

He needs a lender willing to accept "joint borrower, sole proprietor" which is the way guarantor cases were always written in the past and there are a few lenders still offering this.

Northern Rock did it like this as I remember one from around 2003. I can't imagine why VM requires him to be a joint proprietor given the new SDLT situation.

SarahBHC

Thanks for your reply - I thought that would be the case unfortunately :-(


We looked at some other lenders but VM seemed to be the only one that could help. Coventry BS 'Step Up' wouldn't do it as his son isn't a 'Professional' (e.g. solicitor/doctor) who's wages would go up substantially in the next 5 years; Barclays seemed the perfect solution but they only lend up to age 70, which would give too short a term and make the monthly payments unaffordable.


It's frustrating that it's going to cost several thousand pounds more when my husband just wants to help his son onto the property ladder and doesn't want any of the money back! I totally understand the reasons for the new SDLT, but it unfortunately seems to be hindering this type of scenario.

marksoton

Can he not gift a larger lump sum that may mean affordability is more likely for his son?

AnotherJoe

Try Santander. I did similar with my daughter (much larger percentage deposit, but no payments on mortgage) and there was no requirement I be on deeds / mortgage.

SarahBHC

Funds are limited so there's no scope to do more than 10% plus fees/stamp duty plus helping ongoing for a few years. His son is quite a way off affordability anyway.


Santander have said to our Broker they no longer do guarantor mortgages.

kingstreet

Your broker should be looking through lenders beginning with 'B'.

Hoploz

They've already tried Barclays ... Who's next to try kingstreet?

kingstreet

You have to work out the least worst compromise if you can't get all the things you want in your shopping basket.

This SDLT change will bring more lenders into the pool for joint borrower/sole proprietor but don't expect them all to be offering to go to age 75 in a few weeks time, as many lenders don' offer that on standard mortgages.

Barclays was my "go to" lender for such cases and I've never had to look for more options, so the OP's broker who is going to get paid for doing it should be the one putting in the legwork...

AdrianC

TBH, I'm really not at all surprised that lenders aren't terribly enthusiastic about a borrower who is a long way from meeting affordability rules being backed by an older guarantor with "limited" funds. It sounds like a recipe for a worthless guarantee against a relatively high risk of repossession.

You say he's mortgage-free. Has he considered borrowing against that current property?