Mortgage for my daughter

dsl34

Hi everyone, this is my first post.  I really hope someone can help with some advice.  My daughter and her partner bought a house a few years ago.  They had a baby. The relationship has since broken down and he has moved out and the house is to be sold.  My daughter only works 3 days per week (not on a high income) but is in receipt of part time wages, benefits, child support and child benefit and she will come out of the sale with a little bit of money.  Is there any way she would be able to get a mortgage by herself  or with mine and my husband's assistance? And if we are to help her, how would that work and what would we need to do?  By way of information, we own our own home on which the mortgage is almost paid and there is a huge amount of equity in it.  She (and we) believe that renting is just dead money and we would love it if after all the heartbreak of the split, she could somehow manage to stay on the property ladder and have a home for herself and our grandchild.  Thanks in anticipation.

TheJP

It all depends on what money she will have from the sale, her income (most lenders will only accept certain benefits as income, child benefit was acceptable for my lender), outgoings etc. You could release equity from your house but would that be as a gift or as a charge as again some lenders don't like another charge being added to the property.

Brie

I assume she doesn't already have a mortgage in the current house.  In which case her OH should be paying until such time it is sold.  

If your home is nearly paid off is there any way you could overpay that and clear it completely?  That way you/hubby/both could go joint on a mortgage with daughter with her being the sole beneficiary should either/both of you die.  

Sncjw

She will have to pass the affordability tests the lenders put in place. If she comes away with money she could use that as deposit to bring down mortgage amount but she will have to pass affordability espically with a child and low income. 

dimbo61

We have no idea about so many things !
Daughters  income, savings, child maintenance, price of housing in your area.
Your ages, income, savings, pensions, equity in your home.
Now you may well be  able to take out a mortgage against your home to provide a bigger deposit so your daughter can buy a place of her own !
Many one for a local mortgage broker who can look at the full picture 

ManekiNeko

It's really difficult to advise without having the full financial picture of both yourselves and your daughter - as they say, the devil's in the details.

Anecdotally, you might like to know that I was able to get a mortgage although I'm on a low income (disability-related benefits) as I'm too unwell to work right now. I went through a very lovely broker and ended up getting a small mortgage of £68,499 with a high street bank, which was the maximum I could have borrowed with that lender, plus the fee.

I could have borrowed up to about £72k with another high street lender, but preferred the one I went with due to the less restrictive mortgage terms.

I was able to do this because of having a large deposit (this was allowed despite being on benefits as it was held in a Personal Injury Trust), and because I have a long history of responsible credit use with no issues. Even so, the max. I could borrow took me to 60 per cent LTV.

The other reason for my big deposit was that my DS also kindly gifted me a deposit, as I couldn't afford the full amount on my own (I could have bought a cheaper and nastier place, but not this one). At £10k, this was too large a gift for me to accept so I'm gradually repaying her kindness. It was a gift though and she signed legal papers to declare this, and confirm it wasn't a debt and she had no interest in my property. Do be aware you'd need to sign a similar declaration yourself, unless you make it a loan, in which case the mortgage lender will factor it into their affordability calculations.

Do be careful as your daughter is on benefits in terms of how you send any money to her - my sister sent the gifted deposit directly to my solicitor so it never went into my bank account (otherwise the DWP could have argued it was my personal savings and stopped my benefits), and the paperwork she signed was clearly marked that it should be used as a house deposit only, e.g., if the purchase fell through for any reason the money was to be returned directly to her, not to me. I also made it a point to update all my benefits on my house buying process at every key stage, and this will be the safest thing to do for your daughter as well, so they can never say they weren't kept informed.

I'd also recommend you take some financial advice from an independent person, as you need to think about protecting your own finances and retirement as well as helping your daughter. You do have a lot of options here - guarantors on her mortgage, gifted deposit, lent deposit, buy the home yourselves and rent it out to her, etc.

Also - you probably know but benefits will pay towards the cost of rent from a landlord (but not to someone renting from family), with the landlord responsible for all buildings-type repairs. They don't pay anything towards mortgages, although in some cases will pay towards a service charge for a leasehold flat (but that won't apply to the best of my knowledge as your daughter is working). There is no landlord to turn to if urgent repairs are needed. All I will say is, as a frugal person used to budgeting, and even with a survey done before buying - I believed I knew the condition of the place I was buying, and then I moved in and the DIY started, with new problems popping up all the time. I'm pretty broke at the moment, with further repairs yet to come. I'll be ok, just about, due to the massive help and support my dear partner is offering me - to the point of staying at his place until I can get mine habitable. But I'd be eating out of a food bank right now if it wasn't for him, because I did my sums for buying in December 2021, but completed June 2022 - and the cost of living has only risen since then. If she's on a low income, think seriously what your joint plan is for when things inevitably break or need servicing or repairs. She might need to borrow money off you or stay with you for a while.

I figured I'm better off in the long run buying, so I've accepted I'll have much less money each month to live on in the short term, and that financial struggle is the price of me buying a home while I'm on benefits. I'm ok with that, but if I had moved into a cheap rental or a council home, I believe I'd have more money in my pocket right now and every month. I'm not saying don't - I'm just saying she'd be well served to run the numbers on buying vs. renting.

Please let us know how you get on, and I hope some of that was useful for you.