I want to help with daughters morgage: how

razzinitup

Me: 45
My house 180k
My mortgage 25k (15yrs)

My Daughter 27 (yes I did start young)
Her partner 30.

Daughter is selling her first time buy flat and should have about 10k for deposit.
They can only afford a mortgage of about 150k.
The houses near them are about 200k to 230k.

In my unthinking wisdom I offered to help with the shortfall over about 7 years.
This means I will have to commit to around 50 to 80k of their mortgage.

I originally offered to go 50/50 on a 300k house with extra room for either lodgers or foreign students to help with the mortgage. However this is not a preferred option for them as they both have to work long hours and would have very little time to themselves.

They have now asked for help with around 60k.
I want to help if I can; I’m not too worried about making a profit from them. (Its family)
But I don’t want it costing me either, So if I end up paying towards their mortgage for 7 years, When they sell / buy me out, I will need to cover loan and cost of loan.
Can anybody advise the best way to go about this?
Are their mortgages about that allow this?.

Tiddler_2

What are the incomes for the 3 of you? Are you looking to make monthly payments on the top up yourself, or are you wanting the "kids" to pay the payments?

There are options on both of these available but which is right for you depends what you want to do.

beingjdc

My boss did this for her sister in 1989.

Relationship broke up, payments stopped, she was guarantor. She had to choose between paying her sister's mortgage for two years, or taking the negative equity on herself.

Just sayin', like. It's possible to do, of course it is, but you might help more by encouraging them to wait for a while until they build up a bigger deposit and houses cost less.

MortgageMamma

personally I think they should hang fire and you should hang on to yo ur money. I know how it is with family I am a mother myself and would do it for my kids, but the economic conditions right now are very unstable and house prices are falling. Nobody knows how long this will last but I think when in doubt do nothing.

If you remortgage your home and give it to them, not only could you become a victim of negative equity but they could as well. its a risky investment and you could end up losing that deposit and lumbering yourself with a larger mortgage which you would have to aim to clear before you retired.

It really is a good idea to sit and wait. If house prices come down like people think they will then your family members may well be able to do this without your assistance in the near future.

razzinitup

Hi all
Thank you for the replies.
A couple of issues I can respond to.

beingjdc: A couple of friends have mentioned the possibility of relationship problems. I am 100% sure this will not happen with my daughter and myself.
I'm 85% sure that her and partner are in a lifetime relationship.
If a mortgage was taken out this way I would make sure my name is on it and it takes my signature to sell. (we all hope it never comes to this)

MortgageMamma: What you say about retirement is very much on my mind.
I told my daughter that my offer would be for 7 years only. If they can not payback or buy me out the house gets sold. I want to help but can’t have my help/investment turning into inheritance.
Very aware of the possibility of falling house prices. This is a card I’m holding in my hand. Its no guarantee I’ll play it.

Tiddler: My income: I have always been self employed. I am confident the banks would be falling over each other to lend me the full amount for the house.
I was thinking of ending my current 25k mortgage but reading this web site suggest that’s not a great idea. What I need to earn I could do washing glasses behind a bar. I’m not saying I’m wealthy, but I’m not on the bread line either.

Not sure on their income, they told me that the banks have said they could borrow about 180k based on their joint income. But. They don’t think they could make the repayments that comfortably. So they are looking to me to cushion the blow a bit. This is why I originally suggested buying a bigger house 50/50 and rent rooms to foreign students or lodgers.
Its true house prices may fall, its happened before, I don’t think we will see the freefall we did in the eighties.
In the long term they will rise again.

So. Anybody list the options? I know this is not the best investment I will ever make financially. But my family, my eldest daughter in this case is an investment worth more than money can buy.

jammie*dodger

razzinitup wrote: »

I have always been self employed. I am confident the banks would be falling over each other to lend me the full amount for the house.[/quote]

Best to be sure however. Contact a mortgage adviser and check. There's a lot of people on this forum complaining that they can't get a mortgage even though they were "sure" that they would be able to.

Rob.

MortgageMamma

Jammie is right. you need a professional to look at this for you, give you costings etc - mortgages are not easy to come by at the moment

Tiddler_2

I initially thought that you were looking to be a guarantor/possible joint mortgagor in order to boost it on an affordability basis in order to get the mortgage - however it appears that they can afford (in the mortgage company's eyes) the mortgage themselves.

If you are going to be a joint owner of the property then one thing to be aware of is that the majority of mortgage lenders will only provide a mortgage to the people who are going to live in the property - as you are not going to be living in the property then those lenders will not consider it.

However some will consider it if you are looking at borrowing less than 75% of the value of the property.

My first point of call would be Abbey.

The hardest point on this is the limiting it to 7 years until they are in a position to afford it themselves - lots can happen in that 7 years (kids etc) and if you did fall out over the property you couldn't force them to sell without it getting messy and going to court, and then if there are children the Judge may not see in your favour.

Take care & some legal advice

Bismarck

"my unthinking wisdom"

suggests to me you'd like to help but your gut instinct is that you shouldn't.

"It really is a good idea to sit and wait. If house prices come down like people think they will then your family members may well be able to do this without your assistance in the near future." I think this is for the best...stretching yourself in the current climate does not make much sense and with the best will in the world, this is stretching the couple's resources...is there anything that means they need to move now?