First time buyer - parents mortgaging property?

Liam12345

Hi all,

So I asked on here previously about my options as a first time buyer with earnings lower than necessary for a mortgage. I'll give you the situation below, hopefully it makes sense.

I am a student with a job lined up at around 23k per year. The salary is expected to rise quickly. My parents are looking to downsize and have around 300k equity in their current property, and have very kindly offered to help me achieve a deposit of around 40k. Now, I know my earnings are too low to get a mortgage on my own (property price 180k minimum), so I've been thinking of alternatives.

First, I wondered whether I could use my parents earnings as a guarantor, which would easily put me in the affordability threshold. It seems the only way to do this would be to have a mortgage with high interest rates, which I'm reluctant of doing.

Second, I've considered my parents being the owners of my property (and getting a mortgage on it themselves) - that way I would effectively pay them 'rent' to cover the mortgage costs. But would I be able to transfer that mortgage to me once my affordability was at a suitable level? I'm not sure how that works.

If anyone can provide any insight into these I'd greatly appreciate it - or if anyone has any alternatives. I can clear anything up if necessary.

Just a final note: I don't need to be told about the risks of mixing family and money etc, I'm aware of the risks and not concerned by it.

Whitee

Sorry I can't help but just thought I'd say good luck! Sounds like you're in a good position anyway.

I hope someone can offer some good advice!

Xyzzy

Hi Liam, a guarantor mortgage may be a good option for you, have a look at Barclays family affordability plan. The main thing to consider if your parents take the mortgage out for you is they would pay the stamp duty surcharge- 3% extra. Then when you want the mortgage in your name you would need to make a full mortgage application, may pay stamp duty and are likely to have valuation fees.

Liam12345

Xyzzy wrote: »

Hi Liam, a guarantor mortgage may be a good option for you, have a look at Barclays family affordability plan. The main thing to consider if your parents take the mortgage out for you is they would pay the stamp duty surcharge- 3% extra. Then when you want the mortgage in your name you would need to make a full mortgage application, may pay stamp duty and are likely to have valuation fees.

Thank you - I've had a look at the Barclays Family Affordability Plan and it seems to be just the kind of thing I want.

It seems to me to be a shared ownership scheme though, so I would own the property jointly with my parents - do you know how this works in terms of classifying as a second property for my parents? And do you know how difficult it would be to 'buy out' my parents once I was in a position to qualify for a mortgage based on my own earnings?

Liam12345

Whitee wrote: »

Sorry I can't help but just thought I'd say good luck! Sounds like you're in a good position anyway.

I hope someone can offer some good advice!

Thank you. I'm in a good position but not a typical position, hence why I'm finding it hard to find a suitable mortgage for me! The one posted above seems to be the right kind of thing though

dimbo61

Buying through our Family Affordability Plan
Through our Family Affordability Plan you can apply for a joint mortgage with members of your family, which could enable you to afford a larger mortgage and access a wider range of mortgage deals. You’ll have full ownership of the property, and your family members won’t be liable for """""Stamp Duty """""".
Both you and your parents will be responsible for all mortgage repayments and charges, so you’ll all need to demonstrate that you can afford the repayments. Your parents will also need to show us that they’ve taken independent legal and tax advice, so they understand the risks involved.
If your circumstances change and you can afford the repayments on your own, you can remortgage and release your parents from the joint mortgage.

Taken from the Barclays website

dimbo61

http://www.barclays.co.uk/mortgages/family-springboard-mortgage

Barclays also do the springboard mortgages !!

amnblog

All very nice posts Liam - but none of them any use to you - for various reasons the options highlighted are not suitable.


Just speak to a good broker who will show you how your parents can support you without stamp duty implications.

Liam12345

dimbo61 wrote: »

Buying through our Family Affordability Plan
Through our Family Affordability Plan you can apply for a joint mortgage with members of your family, which could enable you to afford a larger mortgage and access a wider range of mortgage deals. You’ll have full ownership of the property, and your family members won’t be liable for """""Stamp Duty """""".
Both you and your parents will be responsible for all mortgage repayments and charges, so you’ll all need to demonstrate that you can afford the repayments. Your parents will also need to show us that they’ve taken independent legal and tax advice, so they understand the risks involved.
If your circumstances change and you can afford the repayments on your own, you can remortgage and release your parents from the joint mortgage.

Taken from the Barclays website

Ah that's a bit embarrassing, I missed that. Thank you.

Liam12345

amnblog wrote: »

All very nice posts Liam - but none of them any use to you - for various reasons the options highlighted are not suitable.


Just speak to a good broker who will show you how your parents can support you without stamp duty implications.

Could you tell me why the Barclays mortgage above isn't suitable for me? I'll be the first to admit I don't know a lot about this, but I'm trying to learn!

dimbo61

I like Offset mortgages and YBS do Friends and Family !!