Two sets of parents - one mortgage....
Discussion
Okay hypothetical situation:
Wife and I are looking to get on the housing ladder. For a variety of reasons a mortgage in our names isn't a goer so both our parents are willing to help us buy a house.
Now here's the thing - my parents in law have plenty of 'liquidity', so to speak and are happy to lend us a decent lump sum but haven't had a mortgage in a million years so are a bit uncomfortable with the idea of 'getting into debt'. My own parents have lots of buy to let properties so have all their cash tied up but are more than happy to finance a property that we could effectively 'rent' back from them, the idea being that over the course of say, 10 years we could pay off the mortgage at interest only and pay a decent chunk off the lump sum at the same time. My hope would be that at this point we'd have a good bit of equity in the house to take forward to buy our own place.
So the challenge is that one set of parents have the dosh, the others the willingness to put their names on the mortgage. If both sets of parents had a charge over the house in case me and my wife ran off with someone else, could this be possible from a mortgage standpoint? Of course the easier option would be to get my in laws to do the whole thing themselves seeing as they've got the money to start with but I'm worried that it might be a big sell. Does anyone know if this is remotely possible?
Wife and I are looking to get on the housing ladder. For a variety of reasons a mortgage in our names isn't a goer so both our parents are willing to help us buy a house.
Now here's the thing - my parents in law have plenty of 'liquidity', so to speak and are happy to lend us a decent lump sum but haven't had a mortgage in a million years so are a bit uncomfortable with the idea of 'getting into debt'. My own parents have lots of buy to let properties so have all their cash tied up but are more than happy to finance a property that we could effectively 'rent' back from them, the idea being that over the course of say, 10 years we could pay off the mortgage at interest only and pay a decent chunk off the lump sum at the same time. My hope would be that at this point we'd have a good bit of equity in the house to take forward to buy our own place.
So the challenge is that one set of parents have the dosh, the others the willingness to put their names on the mortgage. If both sets of parents had a charge over the house in case me and my wife ran off with someone else, could this be possible from a mortgage standpoint? Of course the easier option would be to get my in laws to do the whole thing themselves seeing as they've got the money to start with but I'm worried that it might be a big sell. Does anyone know if this is remotely possible?
Your parents could buy the house.
Your in-laws could have a charge over their deposit.
Picking the right lender will be key. I'm assuming your parents will effectively add your propety to their portfolio, rent it to you with the rent and the mortgage payment being pretty similar?
Of course in the lenders eyes the house will have to be self financing, and you'll have to pick a lender thats comfortable with your parents letting to you.
Alternatively your parents could buy the place as a 2nd home, again with charges in place for your in-laws cash.
Remember that if in future you decide to "buy" the house from your parents you might be liable for another round of Stamp Duty.
Your in-laws could have a charge over their deposit.
Picking the right lender will be key. I'm assuming your parents will effectively add your propety to their portfolio, rent it to you with the rent and the mortgage payment being pretty similar?
Of course in the lenders eyes the house will have to be self financing, and you'll have to pick a lender thats comfortable with your parents letting to you.
Alternatively your parents could buy the place as a 2nd home, again with charges in place for your in-laws cash.
Remember that if in future you decide to "buy" the house from your parents you might be liable for another round of Stamp Duty.
The second home idea I'd not really thought about. Food for thought there.
My thinking was that say the house is £200,000. My PIL could stump up £125,000 with my own parents taking out an interest only mortgage for the rest. We could pay the mortgage (around £250 at current rates) and then a decent chunk off the lump sum every month too (say £550). After 10 years we'd still have the £75,000 mortgage but the lump sum to my in laws would have come down by £66,000. I'd hope that house prices had recovered somewhat by 2020 and pricing in 15% appreciation that'd leave us with a house worth £230,000, on which we'd owe £134,000, certainly a better prospect than another 10 years of renting at £850 a month! There are lots of 'what if?' variables to consider which include prices not going up/crashing/rates soaring/recession/job losses but even with all the worst case scenarios it's a fairly safe transaction with plenty of equity and manageable repayments. My in laws may eventually gift us a portion of the lump sum but I'd prefer to do the figures on it being a loan at this point.
Clearly if mortgage rates rose then the interest only mortgage would rise and the payment off the lump would be squeezed but I'm confident that with such a big chunk of equity we could always find the best possible deals.
So presumably the charge for my in law's cash be a matter for the family solicitor at the time of completion? Would they then pay the lump sum to the solicitor handling the conveyancing?
My thinking was that say the house is £200,000. My PIL could stump up £125,000 with my own parents taking out an interest only mortgage for the rest. We could pay the mortgage (around £250 at current rates) and then a decent chunk off the lump sum every month too (say £550). After 10 years we'd still have the £75,000 mortgage but the lump sum to my in laws would have come down by £66,000. I'd hope that house prices had recovered somewhat by 2020 and pricing in 15% appreciation that'd leave us with a house worth £230,000, on which we'd owe £134,000, certainly a better prospect than another 10 years of renting at £850 a month! There are lots of 'what if?' variables to consider which include prices not going up/crashing/rates soaring/recession/job losses but even with all the worst case scenarios it's a fairly safe transaction with plenty of equity and manageable repayments. My in laws may eventually gift us a portion of the lump sum but I'd prefer to do the figures on it being a loan at this point.
Clearly if mortgage rates rose then the interest only mortgage would rise and the payment off the lump would be squeezed but I'm confident that with such a big chunk of equity we could always find the best possible deals.
So presumably the charge for my in law's cash be a matter for the family solicitor at the time of completion? Would they then pay the lump sum to the solicitor handling the conveyancing?
Edited by bennyboydurham on Thursday 30th September 11:51
Sorry Tonk, I don't follow you.
My PIL could buy us a house outright tomorrow but I'm not comfortable with that and my parents also would like to help in someway. I devised the idea that my PIL could put up the deposit and my parents do the finance as a way that:
a) my PIL get around the same return they'd get from having cash in a UK bank at the moment (although if rates soared then they won't but that's not a problem)
b) we can build up some equity
c) less of my PIL's cash is tied up
d) the amounts are manageable
If I ran off with the bird in accounts then yes my PIL would be very pi$$ed off and would, I'm sure simply buy out my parent's share (or the banks share, in this case) and then the house would belong to my (ex) wife. They may decide to sell it and my wife will continue to pay the BTL portion on her own until it's sold. I don't know because I'd be living in the back of my car at that point. When couples split up it gets messy, even when a house is jointly owned. I don't see how this could be any more or less messy. I will endeavour however not to point my sword at any work colleagues....
To answer your other question yes I am self employed and the rates we are being offered are not competitive.
edited to be less sarcastic
My PIL could buy us a house outright tomorrow but I'm not comfortable with that and my parents also would like to help in someway. I devised the idea that my PIL could put up the deposit and my parents do the finance as a way that:
a) my PIL get around the same return they'd get from having cash in a UK bank at the moment (although if rates soared then they won't but that's not a problem)
b) we can build up some equity
c) less of my PIL's cash is tied up
d) the amounts are manageable
If I ran off with the bird in accounts then yes my PIL would be very pi$$ed off and would, I'm sure simply buy out my parent's share (or the banks share, in this case) and then the house would belong to my (ex) wife. They may decide to sell it and my wife will continue to pay the BTL portion on her own until it's sold. I don't know because I'd be living in the back of my car at that point. When couples split up it gets messy, even when a house is jointly owned. I don't see how this could be any more or less messy. I will endeavour however not to point my sword at any work colleagues....
To answer your other question yes I am self employed and the rates we are being offered are not competitive.
Edited by bennyboydurham on Thursday 30th September 12:18
edited to be less sarcastic
Edited by bennyboydurham on Thursday 30th September 12:26
bennyboydurham said:
....with my own parents taking out an interest only mortgage for the rest. We could pay the mortgage (around £250 at current rates) and then a decent chunk off the lump sum every month too (say £550). After 10 years we'd still have the £75,000 mortgage but the lump sum to my in laws would have come down by £66,000.
A minor point compared to other comments (which I agree with) but at current rates if you paid your parents £800/mth you'd have well paid off the loan before 10 years was up.anonymous said:
[redacted]
I've answered the first one. The mortgages we can get on our own two feet would have our eyes out due to us both being in self employment.No I honestly don't think they will. My parents live on the other side of the country and my in laws have other things to worry about. It's a loan agreement and that's it. They MAY decide to give us something further along the line but I'm not banking on it nor do I expect it.
Same answer as above. We are a greater risk than the people guaranteeing the mortgage, so they'd still have our eyes out as the expectation is that the guarantor will be removed at some point down the line.
Edited by bennyboydurham on Thursday 30th September 12:25
bennyboydurham said:
I've answered the first one. The mortgages we can get on our own two feet would have our eyes out due to us both being in self employment.
How long have you been self employed?How many years accounts do you have?
Do you have accounts form April 2010 (one large lender is now refusing loans to s/e's whose accounts stop at Apr'09.)
bennyboydurham said:
Same answer as above. We are a greater risk than the people guaranteeing the mortgage, so they'd still have our eyes out as the expectation is that the guarantor will be removed at some point down the line.
The guarantor is released either by you remortgaging in your own name (which at £200k will mean you are paying SDLT.) In terms of you being a greater risk, a loan to value like you are suggesting will govern the risk as being top tier, as long as your numbers add up.Hey Scotal
I've got lots of accounts going back to 2005 when I first started as a limited company. My paper income, for reasons that will be obvious to anyone who operates a business in this way is pretty low, as is my wife's. It's this combination of lowish accounted earnings and self employment that puts us out of the game for a competitive mortgage.
I've got lots of accounts going back to 2005 when I first started as a limited company. My paper income, for reasons that will be obvious to anyone who operates a business in this way is pretty low, as is my wife's. It's this combination of lowish accounted earnings and self employment that puts us out of the game for a competitive mortgage.
bennyboydurham said:
Hey Scotal
I've got lots of accounts going back to 2005 when I first started as a limited company. My paper income, for reasons that will be obvious to anyone who operates a business in this way is pretty low, as is my wife's. It's this combination of lowish accounted earnings and self employment that puts us out of the game for a competitive mortgage.
Are you self employed? Seems like you may be an employee of your limited company. I've got lots of accounts going back to 2005 when I first started as a limited company. My paper income, for reasons that will be obvious to anyone who operates a business in this way is pretty low, as is my wife's. It's this combination of lowish accounted earnings and self employment that puts us out of the game for a competitive mortgage.
And not sure what you mean by lowish accounted earnings? - small salary/bigger dividends? Or paying yourself from money 'not in the books' so to speak?
I'd imagine mortgage companies will be happier with the first option and less so with the second.
worsy said:
Ben, Firstdirect will lend you based on 3 years accounts including divis. A mortgage shouldn't be a problem.
Alot of s/emp indivisduals are finding that their accounts (which are filed to minimise their tax liability, all perfectly legally, are now coming back to bite them when it comes to borrowing money from the not so generous banks.Actually getting a mortgage may well be no problem at all. Getting a mortgage of the size he requires might be a bit of a b
d.scotal said:
worsy said:
Ben, Firstdirect will lend you based on 3 years accounts including divis. A mortgage shouldn't be a problem.
Alot of s/emp indivisduals are finding that their accounts (which are filed to minimise their tax liability, all perfectly legally, are now coming back to bite them when it comes to borrowing money from the not so generous banks.Actually getting a mortgage may well be no problem at all. Getting a mortgage of the size he requires might be a bit of a b
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