Co-signing on a siblings Mortgage. First Time Buyers.

steve0612

Firstly, thanks for taking the time to read what I'm about to write, this is my first post here so apologies for any rules I unwittingly break! 

So, myself and my sister do not and have never owned our own homes (We will be first time buyers). My mum is in a position to lend us both some money towards  deposits on house, but my sister is a single parent and unlikely to obtain a reasonable mortgage on her own. 

I too would like to buy my own home, I have a much better wage than my sister, better credit rating and no dependents/low monthly outgoings. I will probably want to wait 6 months or more though as I'm due to move to a new area for a new job. 

Too help my sister out, I was going to co-sign (not co-borrow) a residential mortgage with her. She would be paying all the bills and the deposit (as a first time buyer), but I would also be liable should she fail to pay. That is absolutely fine and I still want to help my sister out.

My research has shown me the downsides and positives to being either a co-signer or guarantor in terms of liability, but what I've failed to find is how it would affect me when I decide to buy a house and applying for residential mortgages to pay for it.

Being a first time buyer myself, would I now be classed as a home owner, being denied access to first time buyer schemes for myself and also having to pay stamp duty when I buy a first home for myself?

Would it affect the amount I can borrow as I'm technically liable for another mortgage if something goes wrong? 

Is there a better way than co-signing that would alow me to help my sister get a mortgage for the amount she needs without significantly adversely affecting myself? 

davidmcn

I think we need to check what you're doing, as you seem to think there's something called "co-signing" which is different from being a borrower or a guarantor. If you just mean you're a guarantor, then no, you're not treated as being an owner for FTB purposes, but it will be treated as an existing liability for your own mortgage purposes as you will be liable to pay your sister's mortgage. It's not something advisable for FTBs to get involved with, unless you've got big enough incomes to easily afford both mortgages.

Also note that your mother lending you money isn't likely to be acceptable to lenders, it would need to be a no-strings-attached gift. 

kingstreet

Search for "joint borrower, sole proprietor" as that is the new term for guarantor. You will be party to the mortgage but not the property ownership. As david says, this mortgage will either see the capital balance deducted from your borrowing power, or the monthly cost taken to reduce what you can borrow. Depends on your chosen lender at the time.

monetxchange

From a personal point of view, where it's nice that you want to support your sister, it's ended stickily for several sets of siblings I know. Say your circumstances changed like wanting to get a place with a partner, wanted your name off this mortgage, decided to move away. Would your sister be able to get lending on her own for the entity of the mortgage if this happened? All siblings I know that did this ended up with one moving off and then the other being left with their half which was too small to get a place on their own and led to bitterness because they assumed sibling would want to be in this arrangement forever etc. Just wouldn't rush into anything you're not sure you understand the implications of.

AnotherJoe

OP...
1. If your mum lends you the money then that will will be frowned upon by most lenders, they'd want her to give it to you. It is possible to do this because I did it with my daughter but only a couple lenders allow this and there will need to be an agreement that there's no repayment of that loan from your mum until you sell up. 

2. Given Your financial circumstances then if you become a party to your sisters mortgage you could likely forget about getting a mortgage yourself. If you become a party to her mortgage then that's a potential liability against you that will be taken into account. Given you aren't so flush you already have a house it seems almost certain your chances of getting a mortgage go to zero. Unless you earn so much you think you would be able to borrow enough to pay the equivalent of her mortgage and your mortgage. Which doesn't sound likely given what you've written. 

3. The better way might be if your mum became a guarantor to your sister but her age is likely to make the mortgage term shorter and so payments higher. Even if mums earnings allowed that. 

In conclusion this is likely a non starter plus your mum needs to be happy to sign an agreement saying she is giving you the deposit money and doesn't expect it to be paid back. 

csgohan4

be careful family and money should generally not mix

https://forums.moneysavingexpert.com/discussion/5999933/evicting-a-family-member-with-no-tenancy/p1

https://forums.moneysavingexpert.com/discussion/6164489/joint-mortgage-sole-ownership-with-family#latest

Getting another mortgage assuming this can go through, it most certainly will due to affordability, no matter is paying the mortgage as you are both jointly liable

Verix

steve0612 said:

Being a first time buyer myself, would I now be classed as a home owner, being denied access to first time buyer schemes for myself and also having to pay stamp duty when I buy a first home for myself?

Would it affect the amount I can borrow as I'm technically liable for another mortgage if something goes wrong? 

Is there a better way than co-signing that would alow me to help my sister get a mortgage for the amount she needs without significantly adversely affecting myself? 

To answer these questions specifically:
1) Yes you would have to pay stamp duty going forward as you would have 'spent' your first time buyer exemption on this purchase. If you were to remain an owner of this property whilst buying another one you would also have to pay an additional 3% stamp duty on whatever you buy.

2) It will effect the amount you can borrow on a future residential purchase. Lenders would want to see that you can sustain both mortgages at the same time so would deduct the mortgage cost plus running costs from any new application. In reality that would probably make it very hard to buy on.

3) The only alternative i can think of is 'joint borrower sole proprietor' mortgages as have been mentioned before, however i don't honestly know if there would be any that would be suitable for your situation. If your sister is on a low salary but in receipt of benefits there may be more options than you'd think. Another option would be to try and steer your sister down the route of buying a property with an affordable housing scheme like a section 106?

There's probably not an easy way of doing what you want without seriously putting yourself out. It sounds like you want to do a really nice thing, but i would try all other avenues before agreeing to this personally.