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Original poster

Helping sister with mortgage

15 replies

FeatherLoverGod · 04/07/2019 16:37

Hi, I’m hoping to help my sister get her first mortgage but unsure what’s the best way to do it...

My house is in mine and husbands name. It’s worth around 500k and we owe around 100k on it, with the plan being to pay this off within next 6 years. We are currently overpaying by 10k a year.

My sister has seen a house for 120k. She has no deposit but currently renting on very poor conditions. I have offered to give a 10k deposit and to be a guarantor. She is very trustworthy.

Is this something that is done regularly? Would it affect the kind of mortgage she could get?

Any advice from more clear heads than mine would be appreciated.
Thanks

OP posts:
TokyoSushi · 04/07/2019 16:39

I think the £10K for a deposit is very kind. I'd perhaps steer away from being a guarantor if you can though however trustworthy she might be.

ChicCroissant · 04/07/2019 16:39

Don't do it (guarantor), it will affect your credit for however long she takes out the mortgage for.

Would you be expecting a share of the house for your 10K or is it a gift, because you will have to sign paperwork to confirm that aspect.

DoneAdulting · 04/07/2019 16:43

Does she earn enough to borrow the £110k on her own? She'd need to be earning about £27k.

Also £10k deposit on £120k purchase would mean she is limited to mortgages of 95% LTV. Could she stretch to £12k meaning she could look at mortgages for 90% LTV (much more choice, better rates, and mortgage underwriters will be more favourable).

fromdownwest · 04/07/2019 17:10

I would consider the legal implications of becoming a guarantor. Most lenders require a substantial amount of savings on deposit. You are also guaranteeing that she will pay her mortgage, if she doesn't then you and your own home are at risk.

A gift (repayable or not) would be a less risky option. Either way, I would seek professional legal prior to undertaking any route.

Good luck!

Original poster
FeatherLoverGod · 05/07/2019 07:27

Thanks for the advice. I wasn’t sure whether to come off the mortgage of my home which is due for renewal soon, and become a guarantor then. I assumed it would just go then on my income and not against my home iyswim. Thanks for the food for thought.

OP posts:
DonPablo · 05/07/2019 07:29

I think that you sound like a lovely sister! Get some legal or financial advice first, but it is more common than you think. I know a couple of people who had guarantors on their first mortgages.

HotChocolateLover · 05/07/2019 07:31

Could she dripfeed the £10k into a help to buy ISA to increase the money by 25%?

Original poster
FeatherLoverGod · 05/07/2019 08:49

Thank you for the ideas!

OP posts:
fromdownwest · 05/07/2019 11:46

Taken from the Barclays wesbite

"You put up security on a loved one’s mortgage
Open a Helpful Start account in your name and transfer 10% of the property purchase price into it as security on their mortgage"

"You don’t need a borrower deposit
You can borrow the full purchase price of your home because your helper provides 10% as security for five years1."

Burru · 05/07/2019 11:55

Would you consider putting the house in joint names, that way if your sister does default on the mortgage you would have some security.

Depending on your earnings, and given the outstanding mortgage on your own house I would think there’d be no problem with having two mortgages.

fromdownwest · 05/07/2019 12:31

@burru - You would be liable for the higher rate of stamp duty in that instance, and when the house is sold liable for Capital Gains Tax also.

Original poster
FeatherLoverGod · 05/07/2019 18:15

Thanks so much. I’ve just been on the Barclays website and that seems like a really helpful idea. We could in theory take out the whole mortgage- my husband earns 70k and I’m on around 30k part time but I’m uncomfortable about being her landlord. I would rather help her to do it for herself. She is in a dreadful situation with heavy drug users on one side of the terraced house, she has had to seal up all the tiny gaps between shared walls as the smell is so overpowering, and an abusive neighbour on the other. She has a daughter with autism and the other has crippling anxiety. Really desperate for them to be in better housing. Thanks for all the ideas xx

OP posts:
dontbeahater · 06/07/2019 07:22

You are a fab sister. Try to keep things as equal as possible between you do she does feel she 'owes' you.

PragmaticWench · 06/07/2019 07:32

Have you factored in paying legal fees etc? You should also have legal advice for you and your sister separately.

OS22 · 12/07/2019 10:32

Hi,

I am in the process of buying my first house, the house was 127k and I am putting 10% deposit down, 10k of this is gifted from my parents with the extra 2 mine, the mortgage company just asked where my deposit was coming from and then said that it was fine, my solicitor just requested to see the money somewhere within my parents bank account as proof.. another mortgage company I was going to use also said it was fine however my parents were to sign a form stating that this was a gift and wouldn't have to be repaid back..
if she can afford the houses monthly repayments I don't see how this would be an issue :)
Just to get a rough gage I earn 26k and the most I could borrow was 116k (that's with having a little boy who I pay nursery fees for too)

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