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Kelanen

Mortgage Availability on 2nd Home (Primary) - Unusual Circumstances...

Hi there, I have a question that I can't find the answer to despite lots of research and trawling, because it's outside of all the normal questions and advice around second mortgages, holiday homes, BTL, similar situations.

Scenario: My father-in-law wants to move into his (deceased) mothers house, which is owned by his trust fund, but for various complicated reasons, they have determined that the best way to achieve this would be for the Trust to give the house to my wife, and he then live in it (it can't be given to him directly). He wouldn't pay rent, but would be pay council tax, utilities, upkeep, etc and be making about £150k of renovations (if it's relevant the house is worth ~£900k, no mortgage). This transfer of property would need to happen in April.

Background: The quandary is that we are currently renting, and hoping to buy our own home in the next 6-12 months. My wife is currently a first time buyer, but I'm not, and we aren't eligible for any government help-to-buy schemes, so her losing her 'first time buyer status' is not a problem. Her credit rating is great, but she only earns £28k, mine is okay but improving (Experian: high-end 'Fair', should be low-end 'Good' when we apply) but I earn £70k, so it needs to be a joint mortgage with both of our salaries. We are likely to be looking at a £650-750k house with LTV of 46-53% - I'm aware we probably won't access the best of deals on my credit rating, but it's still reasonable, and we'll have a large deposit behind us.

Detail: As I understand it, this would put us in the position of not being eligible for a primary residential mortgage, nor would it be a BTL mortgage, but rather a secondary residential mortgage? To be clear, we will never live in the gifted property, for the foreseeable future (likely 20-30 years) it won't be rented out or sold. It won't have a mortgage on it, and will be owned by my wife in name only, although she will eventually inherit it. The property that we apply for a mortgage on will be our primary and only home, and we plan on being there for 20-30 years also.

Exclusions: To be clear, there are a lot of things I'm NOT asking about here; my father-in-law and the trust between them will take care of additional stamp duty, and costs, I'm not concerned about CGT or inheritance tax. Anything that has a flat cost ticket attached now or later will be taken care of, including if the law changes.

Question:  What I need to know is whether this would affect the range of mortgages we can access, and whether it would push the cost up? I realise it's a vague question, but finger in the air how much? a lot or a little? If it slightly reduces the range of lenders, but won't have much impact on the mortgage or % then we can probably live with it, but if it significantly reduces a range of mortgages (that I am assuming will already be somewhat restricted on credit ratings) and starts increasing the lifetime cost of the mortgage, then we may have to refuse to help him this way.

Bonus Question: The timings don't work, but presumably if we were to get our mortgage first, and then be gifted this property, then there would be no problems? (at least until a remortgage down the line, which I understand is less stringent anyway)

kingstreet

Q - What I need to know is whether this would affect the range of mortgages we can access, and whether it would push the cost up?

A - No. No impact at all.

K_S

@kelanen I've only skim read so apologies if I missed anything crucial.

I think what you're asking is whether a background mortgage-free property owned by your wife and lived in (and maintained) by a parent will have any impact on your plans to borrow up to 375k at around 50% LTV for your own primary residence with a combined income of 100k.

If that is the question then imho (based on the very limited info in your post) there should only be minimal impact (if any) on your purchase plans as the background property is mortgage-free and its expenses are covered by the parent. Depending on the other background details it may have a marginal impact on how much you can borrow with some lenders (thus perhaps slightly limiting the choice of lenders) but it's not possible to put a number to it as different lenders are competitive at different times and there'll be other factors that come into it.   

The contents of your credit report, your age, background debt, other financial commitments, etc. are likely to play a bigger part in your choice or lender/rate than the background property.

Kelanen said:

Mortgage Availability on 2nd Home (Primary) - Unusual Circumstances...

Hi there, I have a question that I can't find the answer to despite lots of research and trawling, because it's outside of all the normal questions and advice around second mortgages, holiday homes, BTL, similar situations.

Scenario: My father-in-law wants to move into his (deceased) mothers house, which is owned by his trust fund, but for various complicated reasons, they have determined that the best way to achieve this would be for the Trust to give the house to my wife, and he then live in it (it can't be given to him directly). He wouldn't pay rent, but would be pay council tax, utilities, upkeep, etc and be making about £150k of renovations (if it's relevant the house is worth ~£900k, no mortgage). This transfer of property would need to happen in April.

Background: The quandary is that we are currently renting, and hoping to buy our own home in the next 6-12 months. My wife is currently a first time buyer, but I'm not, and we aren't eligible for any government help-to-buy schemes, so her losing her 'first time buyer status' is not a problem. Her credit rating is great, but she only earns £28k, mine is okay but improving (Experian: high-end 'Fair', should be low-end 'Good' when we apply) but I earn £70k, so it needs to be a joint mortgage with both of our salaries. We are likely to be looking at a £650-750k house with LTV of 46-53% - I'm aware we probably won't access the best of deals on my credit rating, but it's still reasonable, and we'll have a large deposit behind us.

Detail: As I understand it, this would put us in the position of not being eligible for a primary residential mortgage, nor would it be a BTL mortgage, but rather a secondary residential mortgage? To be clear, we will never live in the gifted property, for the foreseeable future (likely 20-30 years) it won't be rented out or sold. It won't have a mortgage on it, and will be owned by my wife in name only, although she will eventually inherit it. The property that we apply for a mortgage on will be our primary and only home, and we plan on being there for 20-30 years also.

Exclusions: To be clear, there are a lot of things I'm NOT asking about here; my father-in-law and the trust between them will take care of additional stamp duty, and costs, I'm not concerned about CGT or inheritance tax. Anything that has a flat cost ticket attached now or later will be taken care of, including if the law changes.

Question:  What I need to know is whether this would affect the range of mortgages we can access, and whether it would push the cost up? I realise it's a vague question, but finger in the air how much? a lot or a little? If it slightly reduces the range of lenders, but won't have much impact on the mortgage or % then we can probably live with it, but if it significantly reduces a range of mortgages (that I am assuming will already be somewhat restricted on credit ratings) and starts increasing the lifetime cost of the mortgage, then we may have to refuse to help him this way.

Bonus Question: The timings don't work, but presumably if we were to get our mortgage first, and then be gifted this property, then there would be no problems? (at least until a remortgage down the line, which I understand is less stringent anyway)

TechM89

Hi! We have had our mortgage approved, and under the special conditions it was to pay off 2 of my loans (didn’t actually want to do this, our broker put it down without us knowing). But I didn’t want to risk anything going wrong so I’ve paid one off today, and the other will be next week. If they do ask for evidence that they have been paid off, what is it they would want to see? Not sure if it would be updated on my credit report by the time we move? 

smellogs

Good Morning. At the moment we pay regular large amounts to our pensions. We also gift monthly amounts to our children and grandchildren for their savings. How would this be taken into account if we applied for a mortgage? Obviously, these are payments that could be stopped at anytime if funds were needed elsewhere. Also, I have a 0% purchase credit card and another one with a 0% balance transfer. Should I pay these off before applying for a mortgage or would a commitment to pay them off before drawing down a mortgage suffice?

Thank you for all the help and advice you freely give.

K_S

smellogs said:

Good Morning. At the moment we pay regular large amounts to our pensions. We also gift monthly amounts to our children and grandchildren for their savings. How would this be taken into account if we applied for a mortgage? Obviously, these are payments that could be stopped at anytime if funds were needed elsewhere. Also, I have a 0% purchase credit card and another one with a 0% balance transfer. Should I pay these off before applying for a mortgage or would a commitment to pay them off before drawing down a mortgage suffice?

Thank you for all the help and advice you freely give.

@smellogs Quick comments limited to the aspects highlighted in your post -

Monthly discretionary cash gifts - should not be a factor subject to plausibility

Pension payments - ad-hoc payments into a SIPP after receiving your income should not be a factor. If these are regular deductions from salary that show on your payslip then the implications (if any) will depend on the lender, the size, how they show on your payslip, salary-sacrifice or normal deductions, etc.

Credit-card balances (no difference whether at 0% or 30%) - Lenders will normally factor it in as a regular monthly commitment amounting to 3-5% (will differ across lenders) of the outstanding balance. Whether or not you will need to pay it off to borrow how much you need will depend on the numbers. Whether or not cc-debt-to-be-paid-off-before-completion will be ignored or not will depend on the specific lender's policy (usually based on LTV thresholds).

Kelanen

Thank you both very much for your help!

TechM89

Hi! We have had our mortgage approved with Halifax and under the special conditions it was to pay off 2 of my loans (didn’t actually want to do this, our broker put it down without us knowing). But I didn’t want to risk anything going wrong so I’ve paid one off today, and the other will be tomorrow. If they do ask for evidence that they have been paid off, what is it they would want to see? Not sure if it would be updated on my credit report by the time we move? 

Thaisparrow

Hello 😀 have any of you brokers dealt with Virgin Money much? I see their price is good for a 5 year fix, I’m a first time buyer, have checked their lending criteria and thinking of applying for the AIP - I had a default with another bank from 6.5 years ago so no longer showing on credit report and settled anyway. Will be a joint application combined income is £72000 not including bonus, no dependants, both have credit cards but £6000 limits and nil balances, only have £105 HP to speak of. 

The house will be £180k with an £18k deposit. Many thanks! 

Lckuj2018

Does NatWest ask for bank statements again if you change the property? 

Initial property fell through just before validation so we couldn’t get offer. We have chosen another property 5 months later on same application. Will they defo want the statements again?