Posted on 31 May 2016
"I'd like to leverage the 95% equity in our £800,000 home to raise a mortgage for another house which will be used by my son having taken his first job after University. What are the options for going about doing this ? At present, our main home is notionally being used as an asset for our pension in 10 years time."
Thank you for your enquiry via our ‘Ask the Experts’ section of our website.
Although not knowing your full financial position, it would appear, based on the information you have supplied that this something we can help you to explore. From the details you have supplied this looks like you could get a mortgage with your son. You have an excellent salary of £75,000, and you are looking to buy a property valued around £175,000, with no ongoing mortgage commitments to your existing property valued at £800,000.
You have a couple of options, you can remortgage your house and release equity which you can put towards the deposit of the new purchase for your son and the remaining could be maintained by a mortgage taken by your son. Another option is that you could perhaps act as a guarantor for the mortgage, and effectively be jointly responsible for the mortgage until your son can maintain the mortgage independently.
Alternatively, you can benefit from a facility known as a joint borrower/sole proprietor product, which is effectively where two applicants are named on the mortgage, but the title deeds would be in just the one sole name. Again, but both you and your son would be responsible for the mortgage repayment, however as you will not be liable for the second home stamp duty levy as you will not be named on the property deeds. However, I do recommend that you seek independent legal advice as to the options available and the legal implications for you before proceeding with this type of transaction.
As with any mortgage application to enable me to provide you with more definitive clarity we would need your full financial details and know when your son is completing university and whether he has secured employment once he leaves. I would suggest that you contact a John Charcol adviser directly who will be able to recommend the most suitable lender based upon your complete circumstances.
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Answers provided in response to Ask the experts are based on the information provided and do not constitute advice under the Financial Services & Markets Act. They reflect the personal views of the authors and do not necessarily represent the views, positions, strategies or opinions of John Charcol. All comments are made in good faith, and John Charcol will not accept liability for them.
We recommend you seek professional advice with regard to any of these topics where appropriate.