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Buying a house with DD - finance questions

(17 Posts)
ruby1234 Fri 22-Apr-16 17:22:05

DD is looking at buying a house/flat, rather than continuing to rent.

DD will have an available 'excess' income of around £900/month to use for a house purchase/upkeep, her salary is around £28k and she has around £10k as a deposit.

Looking at mortgages, she could borrow around £110k, giving her a purchase figure of around £120k - this is really not enough to buy anything more than a studio flat in this area.

If I (parent) were to go on the mortgage/deeds of a property citing my own income, then DD (we) could get a higher loan (say £170k+) which would enable her to buy a better property.

I do not plan to actually contribute to the mortgage/upkeep and would not ever expect an interest in the house.

What would be the implications financially of this if, say, DD later sold the property? Would capital gains tax be due as it would be my second property? I do realise that if DD were to default on the mortgage then I would be liable for the debt.

Does anyone have pros or cons of this idea or if it is even a viable thing?

titchy Fri 22-Apr-16 19:16:41

Would you actually be able to get a mortgage though? Your current mortgage/ rent would be taken off. Or are you mortgage free? Can you get a mortgage for the same length of time as her - it's hard to get a mortgage that goes beyond your normal retirement age.

Afaik you'd have to be on the deeds, you can be tenant in common rather than joint. You'd pay cgt on your share of house when she sells (I don't think it has to be the same proportion as the mortgage). There's also be extra stamp duty as its a second home for you.

slithytove Fri 22-Apr-16 20:06:00

Could you mortgage your home to lend dd a bigger deposit?

ruby1234 Sat 23-Apr-16 08:07:31

Thanks Titchy. No mortgage/rent of my own. The mortgage length would have to be shorter up to my normal retirement age, so could do 20 years.
It's more the implications for me when/if DD sells up regarding things like CGT. If I only have, say, a 10% share on the deeds, would the CGT only be 10% at sale? If I only have 10%, would they still take into account my full salary when arranging a mortgage?

slithylove - having cleared our own mortgage I don't want to get into another one to fund DD. We will give her some extra cash for the deposit, the problem is more her salary/deposit don't, on paper, add up to receiving a much bigger mortgage herself.

IceMaiden73 Sat 23-Apr-16 11:30:05

You need to speak to a mortgage advisor

However, there may be higher stamp duty as it would not be your first home, and there would be CGT due on the sale on your %

slithytove Sat 23-Apr-16 19:17:35

You say you don't want to get into another mortgage, but isn't that exactly what you are proposing? Plus going on dd 's mortgage will mean she can't get a 30 year term.

And as pp have said, stamp duty and cgt will come into play.

I would have thought if she could get a deposit of say £80k, she would be able to borrow more than £110k as she will have a far better LTV.

slithytove Sat 23-Apr-16 19:18:06

What does she need to get a one bed flat?

slithytove Sat 23-Apr-16 19:21:23

just checked on hsbc and with a salary of £28k and a deposit of £80k, she could borrow £175k assuming no other debt.

Sootica Sat 23-Apr-16 19:25:48

Could you guarantee her mortgage instead?

ruby1234 Sun 24-Apr-16 11:03:21

Hi everyone, thanks for the replies.
There is no way she can raise £80k as a deposit - not sure where that came from? She has around £10k at the moment.

I am not proposing contributing any actual money, just investigating whether it is feasible to be on the deeds as a co-owner in order for DD to secure a higher mortgage.

One bed flats round here are in the region £120k+ in the poorer areas.

Even if we were to guarantee her mortgage, she would still only be able to borrow the same amount?

DD repaying the money is not the issue, it is just I am trying to find a way she can borrow a bit more in order to buy a better/longer term property.

redhat Sun 24-Apr-16 11:07:33

She can't borrow more (unless another lender will lend her more). You can borrow to be part owner of the house. Whether you secure this against your own property and then give her the money (which means she will be able to get a longer term on her own mortgage) or whether you get a joint mortgage with her is the question. Yes you would be liable for capital gains tax since it would be your second property and in all likelihood you would also pay higher stamp duty on the purchase with it being a second property (you would need to check that out).

titchy Sun 24-Apr-16 11:50:42

Another thing to think about - a £10k deposit is unlikely to be enough for a £170k property.

Sammy0511 Sun 24-Apr-16 16:03:35

Im new to this mumsnet site and not sure if im posting this in the correct place but i need some advice.
My ex defaulted on our joint mortgage, the payments have since been cleared and the house is now sold subject to contract. Im hoping to buy a house with my son once sale is complete, will default affect my chances of getting a mortgage?

slithytove Sun 24-Apr-16 16:21:18

If you mortgaged to give her a bigger deposit

ruby1234 Mon 25-Apr-16 10:37:42

Slithy - yes, i could mortgage to give her a bigger deposit, but I don't want to (because I have other DC's and would be obliged to do the same for them too).

However, I have now found that Barclays do a joint mortgage using a child/parents combined income, so more cash can be raised. Both parties apply and are responsible for the payments, DD can afford this on her own, so my name would go on the mortgage, but I wouldn't pay any cash. (Unless the unthinkable happens and she can't pay, highly unlikely).

Thanks everyone for all your replies. x

slithytove Mon 25-Apr-16 23:53:05

So will higher stamp duty and cgt apply?

ruby1234 Tue 26-Apr-16 11:41:06

Hi Slithy
Seems not - check the link

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