Paying somebody else's mortgage .

Suppers_Ready

Wasn't too sure how to title this thread , here's the question .

Daughter has mortgage approx £500/month .
Son has no mortgage or property .

If daughter was to buy another property with a second mortgage can son have her house and pay first mortgage ?

thanks

MorningcoffeeIV

Do you mean that he buys the house from her and gets his own mortgage? Then yes, if he can.

Or that she becomes his landlord and his rent covers her mortgage? Does she want to become a landlord? Can she afford two properties?

Suppers_Ready

MorningcoffeeIV said:

Or that she becomes his landlord and his rent covers her mortgage? Does she want to become a landlord? Can she afford two properties?

The above , he can't get on the ladder but could pay her the value her house has risen which she would use as a deposit for her new house . Does she have to declare herself as a landlord can't he just pay her the mortgage money and pay all the bills ?

silvercar

Suppers_Ready said:

MorningcoffeeIV said:

Or that she becomes his landlord and his rent covers her mortgage? Does she want to become a landlord? Can she afford two properties?

The above , he can't get on the ladder but could pay her the value her house has risen which she would use as a deposit for her new house . Does she have to declare herself as a landlord can't he just pay her the mortgage money and pay all the bills ?

As a close family member she could remain the owner and allow her brother to live in the property and cover bills. Hmrc would be happy for that situation income tax wise, though there could be a capital gains tax liability on sale. A mortgage lender would consider she still has the mortgage and outgoings.

If he is paying her the value her house has risen that should be documented for everyone's benefit. If she is using it as the deposit on a new place it would probably need to be considered a gift to satisfy the mortgage lender. The new mortgage lender will take into consideration that she already has one mortgage to pay.

amnblog

Yes, your Grandson can purchase the current property from your Daughter using a mortgage in his name for whatever price suits your Daughter (subject to affordability on his part). The difference in the value and the purchase price can constitute the deposit.

Your Grandson should use a mortgage Broker as this needs to be handled correctly or it will just fall over during the application stage.

No-one needs to worry about being a 'Landlord'.

Your Daughter's new Lender does not have to worry about gifts.

Suppers_Ready

amnblog said:

Yes, your Grandson can purchase the current property from your Daughter using a mortgage in his name for whatever price suits your Daughter (subject to affordability on his part). The difference in the value and the purchase price can constitute the deposit.

Your Grandson should use a mortgage Broker as this needs to be handled correctly or it will just fall over during the application stage.

No-one needs to worry about being a 'Landlord'.

Your Daughter's new Lender does not have to worry about gifts.

Thank you , we shall follow this course of action .

ader42

Daughter sees a house for £300k, has a £50k deposit and gets a £250k mortgage.
Fast forward few years and house is worth £300k and there is outstanding mortgage of £230k.

Son gives daughter £50k as a gift?
Son effectively intends to pay a below market rent of £500 to cover the owner’s (daughter’s) mortgage.

Is that right?

I would very much expect the daughter’s existing/old lender to want the daughter to move to a new BTL mortgage and take out landlord insurance etc. That new mortgage would of course be at a higher rate than the residential one.

I would also expect the daughter’s new lender to factor in the existing first house mortgage when calculating mortgage affordability for her new second home and she will have higher Stamp Duty to pay too.

Of course, if none of the above caveats from lenders is true then it partly explains the stupid house price rises. 

Annisele

amnblog said:

Yes, your Grandson can purchase the current property from your Daughter using a mortgage in his name for whatever price suits your Daughter (subject to affordability on his part). The difference in the value and the purchase price can constitute the deposit.

I agree that this is possible (as you say, subject to affordability), but I don't think it's what OP's family actually want to do. However, I may have misunderstood horribly.

Using made up figures to illustrate, say daughter purchased house for £200k with a 100% interest only mortgage, that house is now worth £250k, and daughter wants to buy new house for £500k.

I think your method would have son puchasing daughter's house for £50k and taking out a new mortgage to fund that £50k. Daughter would then have to find £700k in total (between mortgages and savings) in order to both pay of the mortgage on the old house and buy the new one.

I think what OP wants is for son to give daughter £50k and then have daughter's existing mortgage transferred to son. Daughter would then use the £50k as a deposit on her new £500k house, and take out a brand new mortgage. If that is what OP wants it won't work; you can't just transfer a mortgage. (There might be a possiblity of doing some transfer of equity stuff and having them both on the mortgage for a bit if the issue is that son wants to keep a great rate that the daughter has - but if the issue is that son won't be accepted for a mortgage on his own, no chance.)

Suppers_Ready

Annisele said:

I think what OP wants is for son to give daughter £50k and then have daughter's existing mortgage transferred to son. Daughter would then use the £50k as a deposit on her new £500k house, and take out a brand new mortgage. If that is what OP wants it won't work; you can't just transfer a mortgage. (There might be a possiblity of doing some transfer of equity stuff and having them both on the mortgage for a bit if the issue is that son wants to keep a great rate that the daughter has - but if the issue is that son won't be accepted for a mortgage on his own, no chance.)

I thought it was a long shot