Joint mortgage but not on deeds

SammiePink

Hello,
I’m new to this forum so please excuse me if I make any mistakes.
My son and his girlfriend are first time buyers and have a fairly decent amount saved already to put down as a deposit. Unfortunately the amount they can borrow on their joint salary isn’t enough to buy in our area ( or even further afield)
We are considering that my husband is included on their mortgage but Not on the Deeds  of the property.  ( Obviously borrowing only what they can afford to repay each month) We are near the end of our own mortgage ( 7 years to go)
We have found a lender that will consider all three salaries but my question is will there be any implications for husband being on their mortgage either now or in the future?

Thank you

[Deleted User]

If they stop paying the mortgage for any reason then he will be liable for the payment and if they dont have money then the lender will hound the one who does have money (your husband).   They could stop paying the mortgage completely and he has to make the decision to keep paying it himself or destroy his credit rating to force the lender to take action when they are heavily in arrears 
He would have no rights in forcing a sale of the property as he isnt named on it.   

So lets say for instance that your son and his girlfriend have kids and later have a big falling out.  If the kids stay with the mum then she is likely to stay in the house and he leaves (just based on what happens in the vast majority of breakups).   Your son and your husband may be forever liable for housing as there are kids involved.   Your husband wont be able to come off the mortgage until they can afford to meet lenders requirements. 

It might seem far fetched but this is something that comes up far too regularly.  

I have done these types of mortgages but I am not a massive fan of them and generally try talk people out of them unless they can see themselves taking on the whole mortgage in the short term. 

MWT

SammiePink said:

We have found a lender that will consider all three salaries but my question is will there be any implications for husband being on their mortgage either now or in the future?

As long as you and husband are comfortable with paying the total monthly cost of the mortgage for its full life, and understand that it will affect your own ability to obtain a mortgage yourselves in the future if you decided to move house for example, then you could proceed, but like Deleted_User, on the few occasions where friends/family have discussed this sort of thing I generally aim to discourage them unless the impact of covering the mortgage is really trivial given your own circumstances.

If you do head down this path make it abundantly clear to your son that it is vital that they talk to your husband if they ever find themselves in a position where they can't make the payment, before they default, so he has a chance to help them fix it before it impacts on his credit rating.

SammiePink

Thank you, this is very helpful.
So as my husband won’t be on the deeds does this mean that there will be no sort of tax implications in the future? ( Sorry if this sounds like a silly question)

MWT

'no tax implications ever' is a big ask since taxation can and does change over time, but right now as he has no ownership in the property there is no exposure to CGT on the possible future sale for him or your son due to him not living in the property.

No IHT exposure either as your husband is not making capital payments (I assume he is not contributing to the deposit?) nor does he own any part of the property.

If this is important to you though, do seek professional advice as nobody here on the forum has access to all of your financial details and circumstances.

SammiePink

Thank you MWT and Deleted_User once again for your replies, all the information you have given has been very helpful. ☺️

getmore4less

The title deeds are the legal owners

For tax purposes it is the beneficial ownership that is important.

You can be a legal owner without being a beneficial owner and the other way round.

MWT

getmore4less said:

The title deeds are the legal owners

For tax purposes it is the beneficial ownership that is important.

You can be a legal owner without being a beneficial owner and the other way round.

True, but as described the legal and beneficial owners are the son and his girlfriend, and the father will be neither, so everything is aligned 'correctly' to avoid the father in anything other than his liability for the mortgage.

Thrugelmir

SammiePink said:

 ( Obviously borrowing only what they can afford to repay each month) 

By adding your husband suggests they will potentially not be. Lenders affordability rules are in place for good reason. All you are doing is helping them to circumnavigate these.