Question on amount you can borrow for a mortgage

bohica

My wife and I are trustees on an investment for our nephew. He has asked us to release money for a deposit on a house - fine. However, for various reasons the details he has given us don't sound right. If you are married with 2 children and a total income of £25K does it sound right that a mortgage company would loan you £150K? (which would be 6 times salary). I tried on a few building society sites and they suggested max loan amount of £60K but nowhere did they ask what the deposit would be. He would have a deposit of around £90K; does that make such a big difference that they would loan 6 times annual salary?

Thanks

Edi81

Not an expert but from reading on here would say impossible. 

amnblog

A household income of £25,000 would not generate £150,000 borrowing so something is misunderstood somewhere.

If your concern is releasing the funds for the wrong purpose, ask to see the mortgage offer before you do so.

You can then see what the purchase price and lending is. You can also see if there are any other complications.

He may be trying to buy as a buy to let as a buy to let mortgage is underwritten on the rental potential.

He may be looking at a shared ownership where he is not buying all of the property, just a share.

Exodi

The figures you've put seem incorrect.

Did your nephew perhaps mean that the house was £150k? Would be much more realistic.

It's wholly irrelevant what his deposit is, that doesn't change how affordable the mortgage is.

bohica

Exodi said:

The figures you've put seem incorrect.

Did your nephew perhaps mean that the house was £150k? Would be much more realistic.

It's wholly irrelevant what his deposit is, that doesn't change how affordable the mortgage is.

My nephew insists the £150K was the loan and that is what made me suspicious. We have some reasons to be careful I'm not going to cite hear.

Exodi

bohica said:

Exodi said:

The figures you've put seem incorrect.

Did your nephew perhaps mean that the house was £150k? Would be much more realistic.

It's wholly irrelevant what his deposit is, that doesn't change how affordable the mortgage is.

My nephew insists the £150K was the loan and that is what made me suspicious. We have some reasons to be careful I'm not going to cite hear.

Understood - I think you're right to be suspicious.

bohica

amnblog said:

A household income of £25,000 would not generate £150,000 borrowing so something is misunderstood somewhere.

If your concern is releasing the funds for the wrong purpose, ask to see the mortgage offer before you do so.

You can then see what the purchase price and lending is. You can also see if there are any other complications.

He may be trying to buy as a buy to let as a buy to let mortgage is underwritten on the rental potential.

He may be looking at a shared ownership where he is not buying all of the property, just a share.

I thought so. The last itme I got a mortgage (which was a long time ago) I think it was 2.5 * joint income or 3 * a single income which is why I was suspicious. It is a family of 4 and the property would be bought as a family home. I've already made it a condition that the deposit is made directly to the mortgage company to ensure it is used for the purpose it was intended as his grandma was caught out by this in the past.

ACG

The size of deposit can have an affect on the mortgage amount with some lenders, but not to the tune that is being suggested. 

4.5x income is probably the max, but that is unlikely on £25k with 3( wife and 2 kids) dependents. 

If they are insisting it is correct, ask who it is with and key the figures in on the lenders affordability calculator. 

Edi81

bohica said:

I thought so. The last itme I got a mortgage (which was a long time ago) I think it was 2.5 * joint income or 3 * a single income which is why I was suspicious. It is a family of 4 and the property would be bought as a family home. I've already made it a condition that the deposit is made directly to the mortgage company to ensure it is used for the purpose it was intended as his grandma was caught out by this in the past.

The deposit doesn’t go to the mortgage lender. It is paid to the solicitor acting on behalf of the buyer. 

Sounds as though you are asking the right questions here. 

Exodi

Edi81 said:

bohica said:

I thought so. The last itme I got a mortgage (which was a long time ago) I think it was 2.5 * joint income or 3 * a single income which is why I was suspicious. It is a family of 4 and the property would be bought as a family home. I've already made it a condition that the deposit is made directly to the mortgage company to ensure it is used for the purpose it was intended as his grandma was caught out by this in the past.

The deposit doesn’t go to the mortgage lender. It is paid to the solicitor acting on behalf of the buyer. 

Sounds as though you are asking the right questions here. 

As above, it wouldn't go to the lender. While I think it is commonly given to the buyers (who then transfer it to the solicitor at the relevant time), I don't see any issues if you make it a condition that you make the transfer to the solicitor directly. The solicitor may charge a seperate fee for each transfer (so doing it this way may cost an extra £20) but I'm sure it's money well spent for peace of mind.