How do I get a mortgage for only half a property?

still_savin

I'm looking to help my son onto the housing ladder, as his mortgage ability would not get him a house locally. We're looking at a property on the market at 200k, and we're considering that the property would be owned 50/50. My son has 20k deposit in savings, so would be looking for a mortgage for another 80k to total his 100k half. I'd be putting in my 100k in cash from my savings, so don't need a mortgage. 
I've been trying to find out online how this would work and not getting very far. I can see that we'd likely be looking at being 'tenants in common' but that's as far as I've managed to get. Would any provider who offered a 'normal' mortgage offer a tenant in common mortgage? I'm just looking to protect my 100k if, God forbid, my son defaulted on the mortgage or something else happened. How do I go about finding him a mortgage for just half the house?
Possibly beyond the scope of this question, but I also want to figure out a way of addressing my tax implications. At the moment, that 100k in savings earns me about 4.5k annually in interest, which is tax free as I have no other income other than savings. From what I can see, I'd be liable for CGT on any 'profit' from the house in X years time, notwithstanding that I've been 'losing' interest each year in the meantime? That might sound a bit mean, but I do need to protect my own income too as well as help out my son!

amnblog

You cannot mortgage half a property.

You can lend your son your cash and have a legal agreement to get it back when he sells.

You do not need to own the property and pay CGT on any gain.

You do need a mortgage Broker.

Hoenir

amnblog said:

You can lend your son your cash and have a legal agreement to get it back when he sells.

Given the mortgage lender will require written confirmation that monies being advanced are a gift not a loan. Enforcing such an agreement might prove problematic. Can only ever be one or the other. 

ACG

You cant, in very simple terms - which half would you own? Which half would the bank reposess if your son never paid? You cant reposess half a property. 

Verious ways to do it - gift with some security on the deeds for your half or joint mortgage. But you should probably speak to a broker to find out the options and to discuss the pros and cons to decide which is the better option for you. 

Mark_d

A mortgage is a loan secured against the property.  If your son defaults on the loan then they repossess the house.  If you want a loan that's not secured again the whole house, your son could get an unsecured loan.  Though due to the risk the bank would be taking, he'd be unlikely to be lent anywhere near 80k.

To protect your 100k from your son, don't let the money get anywhere near him.  It has been suggested that you lend him the money..but if you did this and his house got repossessed, then you'd be unlikely to get all your money back.

DullGreyGuy

ACG said:

You cant, in very simple terms - which half would you own? Which half would the bank reposess if your son never paid? You cant reposess half a property. 

And who would buy half a house from the bank? 


As an aside... it is in principle possible to get a mortgage on part of a house because you have the official shared ownership schemes but that doesn't mean its open to the general public to do the same. What happens there where a bank repossess? I guess they are leasehold so either the bank can sell the lease on with its shared terms in place or escalate to 100% ownership and sell it will less restrictive terms? Or is there an agreement that the housing association buys back the percentage from the bank?

kingstreet

DullGreyGuy said:

ACG said:

You cant, in very simple terms - which half would you own? Which half would the bank reposess if your son never paid? You cant reposess half a property. 

And who would buy half a house from the bank? 


As an aside... it is in principle possible to get a mortgage on part of a house because you have the official shared ownership schemes but that doesn't mean its open to the general public to do the same. What happens there where a bank repossess? I guess they are leasehold so either the bank can sell the lease on with its shared terms in place or escalate to 100% ownership and sell it will less restrictive terms? Or is there an agreement that the housing association buys back the percentage from the bank?

The property is leasehold on usual shared ownership with an RSL/HA.

amnblog

Hoenir said:

amnblog said:

You can lend your son your cash and have a legal agreement to get it back when he sells.

Given the mortgage lender will require written confirmation that monies being advanced are a gift not a loan. Enforcing such an agreement might prove problematic. Can only ever be one or the other. 

Depends on the Lender

still_savin

Thank you all for the replies. Unfortunately I'm more confused than I was before - I thought 'tenants in common' was a recognised arrangement which allowed two disinterested parties to control shares in a property. How then do parents help kids get their first home? I can't afford to 'give' 100k, and one of the posts above said a mortgage provider will want to see evidence that the money has been gifted - maybe I'm misunderstanding it but what the hell is it to do with them if I loan my son money rather than give it to him? Okay I get that they want first charge on the property, but a formal loan agreement that is 'second tier' is irrelevant to them?

grumpy_codger

still_savin said:

Thank you all for the replies. Unfortunately I'm more confused than I was before - I thought 'tenants in common' was a recognised arrangement which allowed two disinterested parties to control shares in a property.

This arrangement is based on a joint mortgage.

How then do parents help kids get their first home? 

A gift (or a loan?) plus a statement, that the parents don't have any interest in the property and cannot claim their share.

Possibly, a joint mortgage.

I can't afford to 'give' 100k, and one of the posts above said a mortgage provider will want to see evidence that the money has been gifted - maybe I'm misunderstanding it but what the hell is it to do with them if I loan my son money rather than give it to him?

I'm no expert, but I don't see any formal problem with a loan if it's not secured on the property. However, it has to be declared and be very flexible in terms of repayment. Otherwise it will affect affordability.

k12479

still_savin said:

...what the hell is it to do with them if I loan my son money rather than give it to him?

If you gift your son £100k, he will have to service debt of £80k.
If you lend your son £100k, he will have to service debt of £180k.

Any lender hoping for their loan to be paid back on time and in full would prefer the first scenario.