Parent Guarantor for mortgage

Mick70

Is this pretty normal when child buying first home ? (It will be as a buy to let ) , the FA arranging mortgage has said I would need to be guarantor . Unsure if this is the norm nowadays 
  Any advice before I say “yes” 😀,  all new to me 

thanks
mick 

pbartlett

Just make sure your parents understand the full implications of being a Guarantor

steampowered

Why would you buy a BTL as a first home? 

You might think it is smart, but it is actually a bad idea.

- Buyer will not receive first time buyer stamp duty relief.
- Buyer will not benefit from Lifetime ISA (government bonus on that is worth £1k per year).
- Buyer will have to pay higher rate stamp duty (3% surcharge) when they buy a property of their own to live in.
- Buyer will have a BTL mortgage liability on their credit report, could make it hard to buy a property of their own to live in.
- Buyer will have to start filing tax returns.

Mick70

I am the parent 

AdrianC

Mick70 said:

Is this pretty normal when child buying first home ? (It will be as a buy to let )

You mean your child is buying their first home...?
Or they are starting a residential lettings business using your money?

I wouldn't have thought a guarantor would be a big help in a BtL mortgage - they're hard enough for non-home-owners with their own equity.

davidmcn

If your child isn't creditworthy enough to start their own lettings business, do you really want to get involved?

[Deleted User]

Situations where lenders require a guarantor happen if they are wary that the borrower is likely to stop paying them for whatever reason. That should cause you to pause for reflection on whether you a) want to do this and b) can afford to pay the bills whenever the borrower stops? It is your liability to pay if/when the person stops

Mick70

It’s changed , the FA said I (as parent ) would need to go on the Deeds also ?
dont like the sound of that ?
also mean I would have to declare everything on my own tax return also ? (I am 40% tax payer )

AdrianC

Mick70 said:

It’s changed , the FA said I (as parent ) would need to go on the Deeds also ?
dont like the sound of that ?
also mean I would have to declare everything on my own tax return also ? (I am 40% tax payer )

The only way they will lend is if you are a joint borrower, which would need you to be a joint owner, so you would also be joint landlord and receive a portion of the income from the lettings business.

davidmcn

Mick70 said:

It’s changed , the FA said I (as parent ) would need to go on the Deeds also ?
dont like the sound of that ?
also mean I would have to declare everything on my own tax return also ? (I am 40% tax payer )

Yes, that means being more heavily involved as being (to an extent) the landlord. On the plus side, at least being on the deeds means you'd have a say in what happens with the property, rather than just being left paying for the mortgage arrears. Hasn't your child discussed their plans with you?

grumiofoundation

Assuming you are a homeowner already means +3% SDLT would need to be paid on this property as you will buying a 2nd property. 

Personally I don't see a reason to do this from the perspective of a FTB due to all the negatives outlined by steampowered earlier.