Helping My Son With a Mortgage.

BostonR

I would appreciate some advice:
1. My son is 25 yrs old and PE Teacher in West London. Salary is circa £23K with £3K overtime.
2. My wife and I are looking to help him with a mortgage.
3. On his current salary, he can loan a max of £90K. He has a £20K deposit. The cost of a suitable flat is circa £200K
4. We have no mortgage and our house is valued at £1.2M. We are both 59 working with a joint income of £200K. We both have excellent pensions. We have savings of £150K.
5. I was hoping I could guarantee his mortgage against our house but it appears not.
6. I cannot be a joint mortgage holder. I can take a second mortgage out but only over 8 years at a huge monthly cost.
7. I am reluctant to throw our savings in as we may need those for a rainy day.
8. I want to work on but my wife wishes to retire shortly.
9. My monthly income after tax is circa £5k.
What I thought would be an easy fix seems impossible - have I missed something obvious? 

kingstreet

6. I cannot be a joint mortgage holder

Why? Joint borrower, sole proprietor would be one option for you to consider but you appear to rule it out...

BostonR

Virgin Money and Santander have both refused. Both indicated that my age is the issue and have to pay mortgage off before I am 67.  

[Deleted User]

you cant just pick lenders randomly as everyone has different criteria.  Plenty lenders allow you to have a joint mortgage and still have your son as the only owner.   

Also, some lenders will allow you to use your house as a deposit as well

You need to speak to a broker to go through what options you actually have

Thrugelmir

What's not clear is what support you are actually willing to provide. There's little point in your son overborrowing and having an unaffordable mortgage to pay. A £90k shortfall is a considerable shortfall. Perhaps save for a while then gift your son some money. With £200k per annum household income your savings appear somewhat low. 

BostonR

Thanks for the advice:
1. The 200K is cash. I have other savings in shares etc of £300K but need to avoid capital gains.
2. I will seek out a broker.

sharp910sh

I say just give him the £90k. 

tacpot12

Have you looked Equity Release? Also, you haven't said what your pension provisions are. Might you be able to take a Pension Commencement Lump Sum in the near future and use this to replace £90K of your savings you have given him? 

kingstreet

BostonR said:

Virgin Money and Santander have both refused. Both indicated that my age is the issue and have to pay mortgage off before I am 67.  

There's at least one lender offering 'JBSP' to age 80 and as JMA said, speaking to a broker and covering all the possible options would be a good idea rather than trying lenders on spec.

BostonR

Thank you. I will follow up on the JBSP.

On pension, I am on a final salary scheme, so when I do retire this is reasonably gold-plated. I cannot touch this pot until I retire or am offered early retirement. If I retired today I could take £250K as a lump sum. We both work in Pharma R&D and given the current situation both our respective companies want us to work on.

GeordieGeorge

If you have savings of £150k is there a reason you don’t want to gift him the money?

It’ll keep things nice and simple, will probably avoid inheritance tax, and still leaves you a very healthy emergency pot in case of unforeseen problems.