Guarantor Mortgage - Over What Term?

Nsar1

Hi we want to help our son buy a flat (he'd be 1st time buyer) In round terms we're looking at a property value of £120k with us gifting £30k. We'd pass any test of affordability to guarantee the £90k. My question is that if we retire in say 10 years time does the mortgage term apply to that 10 year period or can it be arranged over 25 years with an assumption from the lender that in 10 years time, our son (who works for a charity and has a low income at present) would pass an affordability test on the remaining capital at that point or can the mortgage provider assess  our ability to guarantee based on our projected pension income over the whole 25 years?
Hope that makes sense! 

K_S

@nsar1 Depends on how you want to do it. If you have sufficient post-retirement income, there are lenders who will consider a term into retirement for "guarantor" products (also referred to in a few other ways).

Depending on your circumstances (income, assets and cash), there are lots of different ways to support your son to buy his first property, some more hands-off and protective of the parents' interests than others.

Nsar1

Thanks, our projected pension income would pass an affordability test on £90k, let alone the remaining capital after 10 years so as long as the mortgage term is not restricted to "in employment" income that's fine. We are not exactly HNW territory but if everything went wrong for our son we could meet the repayments on £90k over a sustained period wihout it hurting us.I've glanced at the Springboard product from barclays but the rate 3.45% on 95% LTV is not great. Interested in smart ways to do this. T

Thrugelmir

Why does your son require a mortgage with a guarantor?  

Nsar1

Because his income is low.

dimbo61

Will you get a lump sum on retirement ?
Could an Offset mortgage be useful ?
£120K property with £30K gifted deposit is 75%LTV and with Friends and Family offset mortgage with YBS you can at least save interest 

Nsar1

Thanks Dimbo61 neither of us will get a lump sum. Well my wife could in her scheme if she wanted, but it's not a very attractive deal. 

dimbo61

Have you checked ?
Most pensions offer 25% of the Pension you have built up as a Tax free lump sum.
You pay 20% Basic rate taxpayer or 40% Higher rate  tax on the income ( Pension ) you receive after the £12,500 Tax free allowance. 

Nsar1

I'm not sure what the advantage of that would be in this context?

Thrugelmir

Nsar1 said:

Because his income is low.

Then the mortgage may well be unaffordable. 

Nsar1

Thrugelmir said:

Nsar1 said:

Because his income is low.

Then the mortgage may well be unaffordable. 

Isn't that the point of the guarantor? No-one can say what his income/rates/property values will be in 10 years time. After 10 years and assuming a 3% rate the capital is £61K which would make it perfectly affordable even assuming only inflationary rises of 1%