Mortgage matter

[crankedup]

We are thinking about helping our Son buy his first property, we are both retired with no mortgage on our own property. Our Son is self employed (3 years) having just qualified as an electrician. So his chances of obtaining a mortgage are not good as you might imagine. If he put down the deposit what are the chances of the bank/building society accepting my wife and I as warranty for payments using our property as collateral? Thanks.

[Sarnie]

If he has been self employed for three years and has a deposit, why would he need you as guarantors?

[scotal]

crankedup said:

We are thinking about helping our Son buy his first property, we are both retired with no mortgage on our own property. Our Son is self employed (3 years) having just qualified as an electrician. So his chances of obtaining a mortgage are not good as you might imagine. If he put down the deposit what are the chances of the bank/building society accepting my wife and I as warranty for payments using our property as collateral? Thanks.

I assume that your son's accounts don't add up to much over the last 3 years, possibly becuase his accountant has done exactly what he is paid to do and reduced his income for tax purposes? Therefore he can't get the mortgage he wants/needs to buy?**
There are lenders who will take your income into consideration, but your age (if you're both retired) may limit the term he can go to, obviously a shorter term means higher monthly payments on a repayment mortgage. (although there are lenders who will go out a pretty long way.) Can your son actually afford to buy in reality? Quite apart from the deposit, is his work steady enough for him to keep up the monthly payments.
More to the point, when will his accounts be strong enough that the lender will release you from the guarantee?


** If its not that and actually your son has a poor credit file then it might not be able to get him a mortgage at all. S/E applicants are looked at with a pretty harsh eye at the moment.

Its a case of picking the right lender, the right deal and the right property. Any one of those doesnt add up and you're scuppered.

[hamski]

As guarantors, the bank will look at your ability to make the repayments on the loan. Your existing property won't be taken into account unfortunately.

You could consider purchasing the property for your son on a buy-to-let basis, so that he will in effect rent the property from you until such a time when he can afford to take it on himself. Unfortunately, you will end up doubling your costs, as it will be another sale and purchase when he buys it from you.

[crankedup]

Thank you for very helpful responses. Our Son is 30 and just finishing adult training , his earnings have been quite modest and although self employed he has worked for the same Company for the duration. Lowish earnings in return for regular work and training, seemed a fair trade off. But his getting readied now to break into his self employed business under his own name completely.
Currently room lets are 400/500 pounds month and we hate the idea of him throwing this money at renting, and so does he of course. I think the idea of us buying and then letting to him sounds a way forward and we will investigate further. Thanks again and any other tips comment appreciated.

[Grandad Gaz]

Hi David, we did the same to help our eldest daughter and son in law get on the property ladder a few years back.

We found the easiest way was to remortgage our house, to make up the difference on their own mortgage. This worked out to about 50% value of the property they wanted to buy. They then paid us back as and when they could afford to do so over a period of about five years.

We had no intention of making any money out of it and did not even think about charging them any interest. They are both hard working and very careful with their money.
It was a pleasure to help them

[crankedup]

Grandad Gaz said:

Hi David, we did the same to help our eldest daughter and son in law get on the property ladder a few years back.

We found the easiest way was to remortgage our house, to make up the difference on their own mortgage. This worked out to about 50% value of the property they wanted to buy. They then paid us back as and when they could afford to do so over a period of about five years.

We had no intention of making any money out of it and did not even think about charging them any interest. They are both hard working and very careful with their money.
It was a pleasure to help them

Hi Gaz, interesting possibility and your sentiment is exactly how we feel about the issue, thanks, we shall also have a look at the idea for our Son.

[scotal]

crankedup said:

Hi Gaz, interesting possibility and your sentiment is exactly how we feel about the issue, thanks, we shall also have a look at the idea for our Son.

I'm not trying to teach you to suck eggs, but do remember you will be securing this debt on your home, and it will be in your name. Not a dig at your son, but it won't be his problem if the debt isn't paid.
I've recently heard of a couple losing their home over a mortgage taken out in similar circumstances.

[crankedup]

Fair comment Scotal, wake up call when its in black and white.

[Gareth79]

Also technically if the house is purchased using money "lent" from parents as an informal loan this should be declared, although I'm sure it is very very very common that buyers don't mention this.