Mortgage problem

Gareth81_2

Just wondering if anyone can help?....Here goes. My partner and I are trying to get a mortgage on her mothers house which she is selling to us at a very reduced rate (25k below the value)
The problem is we need a 100% mortgage and i find that some mortgage companies won't give us anymore than 90% or others want to charge us extortionate rates.
Doe's anyone know either a cheaper option or a good company?

Ian_W

I may be missing something here, but you don't need a 100% mortgage - a 100% mortgage is 100% of the value of the property not 100% of what you're paying her. Lenders charge more because it's a greater risk for them - if you default and they have to sell the prop they won't get all their money back [after incurring selling costs etc].

If your MIL's house is worth £100k and you are borrowing £75k [100% of what you're paying her] you're only borrowing 75% of the value of the property. That, subject to your earnings being sufficient and your credit rating OK, should give you access to the best mortgage rates.

I'm not quite sure how you approach this situation with lenders but your MIL's discount is, effectively, giving you a 25% deposit on the value of the property. You really need some advice from a mortgage broker - there are some very helpful ones post on this site and hopefully one will read this soon, otherwise I would find one locally and explain it to them as you have here. They may charge a fee or take a commission from the lender but if it gets you a cheaper mortgage it will be worthwhile. BoL.

Woby_Tide

I'm guessing that they actually mean they have no deposit and they are struggling to get some one to lend them the money they need (house value -25k). All dependson situation but guess if you can't get the amount you'll either need your partners mother to drop the price to a level you can get a mortgage for then owe her the remainder as a 'loan' to her. But if she is requiring the equity to move to a new place herself and that isn't possible then I'm not to sure what options you have as you do seem to be obviously stretching yourself

Ian_W

Yeh, Woby, I think we're both reading it a little differently. I'm thinking along the lines of how remortgaging works. Lender will let you have up to 90% of value of property - which is actually 100% of what you want, but not a 100% mortgage :rolleyes: !! Same principal, surely?

Perhaps OP should post more details like house value and whether there are any earnings/credit problems.

Woby_Tide

Actually re-reading I see what you mean Ian, probably right with first post.

Gareth81_2

Just realised i have left off one important thing....the house has a market value of £145k and is being sold to us for just short of £120k enabling us get below the stamp duty threshold. Not sure if we will be able to actually achieve this though!
Many thanks for your help....

Ian_W

Gareth,
I think there are two ways to approach this:
1] As you're doing now with your MIL discounting the price. There are some best buy 100% mortgages HERE on moneyfacts. More expensive than with a deposit but not drastically so. You avoid paying £1450 SDLT - but the Revenue will be after you if they cotton on to the discepancy compared to other local sales and they might also pick up a clue from vendor selling to daughter & BF.
2] Buy at £145k with MIL instructing her sol she will effectively pay your £25k deposit by knocking it off the price on completion. That would allow you, subject to earnings & credit, to apply for lower rate non-100% mortgage and get the best rates. Also avoids any potential hassle with the Revenue as you will pay full SDLT. Also has the added bonus that the correct sale price is registered, so when you come to sell & a potential buyer checks it out on the web it reflects the full rather than discounted price.
Choice is yours.