Credit Rating Question

[MattW]

Hi all,

Quick question for any credit rating experts out there:

My dad is looking to invest a substantial amount and has been chatting to me re investments etc and the return on those investments. Now it occurs to me that I could suggest that he uses the cash to pay off my mortgage and I simply pay him the std mortgage repayments each month rather than the bank i.e. he gets an excellent return on his investment and ultimately we keep the money in the family – in theory this sounds better than making a bunch of bankers richer.

Now notwithstanding the obvious issues around borrowing money from family etc (that would be for us to sort out), I vaguely remember reading something about your credit rating being enhanced by continuous prompt payments of large debts such as a mortgage.

If I were to fall off the credit rating scope for any debt other than std bills (I don't have any other debt than my mortgage) would this affect my ability to obtain credit in the future - for example if I wanted to move and upgrade my home or even pay my dad back I would need to get another mortgage but would have no recent evidence of regular payments of an equivalent value.

Does anyone have an idea if this would be an issue?

Cheers

[B16JUS]

Sounds like a good plan, BUT speaking from experience i would never borrow large amounts of money from close family again.

J

[amirzed]

speak to someone about IHT

you could combine the 2 things with some planning!

[calibrax]

I have to say that I wouldn't advise going into an arrangement like that. Too many potential pitfalls. What happens if something unexpected happens and you were unable to make the payments? or what happens if your father needs the money back? And it may be unlikely, but what if he was made bankrupt at some point for example... your house would have to be sold as an asset to pay off his creditors.

In theory it's a good idea. But having loans with family can destroy relationships.

Anyway, as for your credit record... yes, it does help to have a regular large payment going out. But if you have a car loan or something, that would count. And if you've been paying a mortgage so far, then that will be on your credit record for many years. So the answer is that clearing your current mortgage shouldn't affect your ability to get a new mortgage. In fact, as your dad will not be reporting your arrangement to the credit agency, anyone searching your record will see your debt-to-income ratio (which is a key factor in a bank's decision making) as better than it really is.

Edited by calibrax on Sunday 28th March 19:00

[Pferdestarke]

It depends on the relationship with you and your dad and whether you have siblings to consider. Yes, family borrowing can lead to arguments, but if ground rules and agreements can be established and adhered to, it makes far more sense to 'keep it in the family' than paying fees to the banks.

Make sure anyone else in the family who stands to benefit from your dad's estate is aware of what you are doing.