Is this mortgage amount realistic?

Pardeep1988

Hi

I am looking to move house and am considering my options in terms of borrowing amount.

I have a mortgage free property worth about £500,000

Me and my partner earn about £80,000 combined with no debt or dependants.

Our dream property is up for £875,000 but we would be looking at offering £850,000

We have approximately £50,000 in savings which would cover legal fees and stamp duty and new furniture.

My parents (father retired) and mother (aged 55) who earns 23,000 live with us.

Would a bank look at us favourably to borrow the 375,000 ?
My mother is willing to become a joint applicant although she only had another 5 years at work before she retires

We were originally looking at moving to a property worth about £750,000 which I know would be much more attainable but this property would be a house 'for life' and as we care for my father it has suitable accommodation for him as he gets older. Along with good schools for kids we may have in future.

Thanks

Thrugelmir

Do your parents have a financial interest in the property?

Pardeep1988

Hi no financial interest the current mortgage free property is a family home which was initially my parents ....in the last few years it was gifted to myself and in return I cleared the outstanding mortgage.

They would have no financial interest but would be living with me.

glentoran99

Pardeep1988 wrote: »

Hi no financial interest the current mortgage free property is a family home which was initially my parents ....in the last few years it was gifted to myself and in return I cleared the outstanding mortgage.

They would have no financial interest but would be living with me.

Have you considered the applicable tax you may have to pay when you sell? as this was not sold to you at market rate

Pardeep1988

As this is our principle residence and the value of property hasn't changed since it was transferred onto my name I wasnt aware of a tax liability?

glentoran99

Pardeep1988 wrote: »

As this is our principle residence and the value of property hasn't changed since it was transferred onto my name I wasnt aware of a tax liability?

I don't pretend to know an awful lot about it, but you cant just gift a property, There are Capital gains and inheritance tax rules could come into play as well as deprivation of assets potentially

getmore4less

Gift with reservation/preowned assets is one issue but if the parents combined assets including this house are under 650k chances are zero IHT anyway the new allowances will increase that.

Only you know if you will have enough free cash flow to pay a large mortgage if you are currently saving at least that amount every month then that will be a good indication of affordability.

Carer for rather may be classed as a dependant.

Pardeep1988

I guess what I really wanted to know was weather borrowing such an amount on mine and my partners salary would be something the bank would entertain.

My father isn't receiving any care support at the moment as he is relatively healthy but in just planning for the future.

Either way weather property was on my name or my parents it would be an overall joint move for the four of us and I would take the usual legal advice/accountant advice before proceeding but just wanted an indication of weather what I would be proposing to the bank would be laughed at!

In terms of affordability looking at various online calculators we would be able to comfortably afford £1500 a month towards mortgage payments.

In the future maybe 3-5 years I would have a cash some of about 70,000 which I could use to reduce borrowing as I have a small property abroad which I would sell

At present it is long term let and the propert market in said country is not very fluid.
Again I would factor in any tax implications and currency conversions when making this move

SavingSteve

Lenders seem to vary between 4 to 4.75 times joint salary, so you may just sneak in.

Your father will likely be a dependant, so they may knock some off on affordability.

Also, adding your mother likely not ideal, as that will reduce your mortgage term they'll allow, and thus increase the payments, reducing affordability further. From an affordability perspective you want to have the max no of years between now and retirement as your mortgage term.

I'd suggest calling a broker and maybe one of the direct only lenders (I think First Direct do 4.75 times, but they don't sell via brokers, and they don't do a credit check until right at the end, so little to lose by calling them. check their online affordability calculator too).

Good luck!

OrlaAS

hello,

You mentioned you have a property abroad - you will be liable for second property stamp duty. Liable if you have a property anywhere else in the world.

On a property of £850,000 you will be looking at an upfront cost of £58,000 just for stamp duty.
(£32,500 standard stamp duty and £25,500 second property stamp duty)

Yes you'll be looking at 4.75x or up to 5x income for you and your partner (£380,000 - £400,000). Bringing your mother onto the mortgage would limit the mortgage term to her age of retirement, unless she has solid evidence of a pension income. Lenders minimum term is 5 years and of course for the amount your looking to borrow this will be deemed unaffordable over this term.

amnblog

There are some lenders that will consider this case but it will be tight so your interests are best served by having a broker handle it for you.