Parents helping to purchase new house question / CGT

mrmauled_2

Hi,
Long time lurker, first time post!

My wife and I are looking to purchase our dream home which is 210k (though we think we could offer 200k cash). We currently have our house on the market at 170k with 86k remaining on mortgage however it's not selling thanks to the current climate.

We are keen to secure the house ASAP and are looking at options to purchase the new house while we either offload or rent out our existing house. I've done a household budget and we can afford a repayment mortgage on both with room to spare but the problem is persuading someone to lend us the money.

Our current lender turned us down today on both of these options due to myself being a director and them using averages of yearly dividends.

This leaves us with the obvious option of a self-certified mortgage which I'm fine with however another we're considering is asking part of our family a favour as an alternative.

What we would like to propose is them being tenants in common and being listed on the mortgage with both of us. So it would be father / mother in law and my wife and I listed. Even with the non-favourable income assessment on my averaged out earnings we should easily be able to get the new mortgage on top of our existing mortgage.

We would pay our existing mortgage and the new mortgage, and eventually our existing house would sell and provide us with the cash to knock off this new mortgage and have it transferred into the names of my wife + I. The mortgage lender wouldn't have to worry as we would be able to afford the new reduced mortgage amount and the deeds would be changed accordingly.

This leads to a few questions however and my searching / googling failed to reveal exact answers (we plan to consult an IFA asap but thought I'd ask for opinions / advice here).

* Will the mortgage lender for the new mortgage evaluate all 4 of our incomes as with a normal joint application? Will they care how we assign percentages of the tenants in common agreement?

* Will there be any CGT due either on our existing home when we sell it or when we receive the 'gift' of whatever % of the new house is assigned to my in-laws.

* Are there any risks or things to avoid with this idea?

Many thanks for any help or advice.

silvercar

easiest would be to get a BTL mortgage on your current home and then a new mortgage for your new home. Most lenders will then disregard your current home in the calculations for the new mortgage amount, provided the rental covers the mortgage payments.

PasturesNew

mrmauled wrote: »

My wife and I are looking to purchase our dream home which is 210k (though we think we could offer 200k cash).

You don't have the cash, so you wouldn't be making a cash offer. Your offer is subject to mortgage.
So I was confused why you mentioned it.

mrmauled_2

Sorry I meant 200k no-chain subject to mortgage.

Thanks for the comment silver.

The only downside to the BTL route is the cost of switching from our penalty period on our current mortgage I guess. Which can't be helped and it is a viable option. So then we'd have a BTL on our existing property which we could then either rent or sell and then a self-cert mortgage on our new property.

Would be interested if anyone has any comments on the family tenants in common option