Posted on 8 February 2011 by Pauline Bailey
I own a house worth £300,000.00 mortgage free and I am 66.
My daughter is just going through a divorce and is selling their house. She should have £50k to put into another house. She has 2 kids age 4 and 8(8 yr old is autistic).
She works part time as a nurse and gets tax credits. To get a house in a safe area suitable for the children (the 8 year old has to have a bedroom to himself) she needs £150k.
A mortgage adviser says she earns enough to buy at £150k but because a good deal of the income is family credits she an only get a mortgage for £50k. Renting for a year or so isn't an option as the autistic son cannot cope with changes.
What would be the best option for me to get £50k for her as she can then pay off the loan each month with the money she will have coming in.
Or could I go in joint for the £50k with my daughter?
I would be interested to see the breakdown of your daughter's income as their are still a few Lenders who will look at taking tax credits and other benefits into account when calculating affordability. If your daughter is also going to be receiving maintenance payments from her husband it may also be possible to include these.
As far as the best way for you to help her, it should be possible to release £50,000 from the equity in your own property as you suggest. How you do this will largely depend on your own income and whether or not you can afford to make the monthly payments on a mortgage without taking into account any money your daughter may give you.
If you can afford to make monthly repayments it would be possible to get a mortgage over a term of around 9 years. You need to consider very carefully if you want to do this because on a capital & interest basis the monthly payments could be quite high and on an interest only basis you would have to have some way of repaying the debt in 9 years time and you don't want to be left with no choice but to sell up.
If you do not have sufficient income it would still be possible to release the equity, but you would be looking at a Lifetime mortgage whereby the capital and interest would not be repaid until the property was sold, either on your death or earlier if you move. This can drastically reduce the amount of any legacy you are able to leave and I strongly recommend that you take independent legal advice and consult any beneficiaries before taking this route.
I believe you would benefit from speaking to one of our independent mortgage advisers. If you call on 0344 346 3672 and tell the adviser the date of your question, they will be able to look at your situation and take it from there.
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.
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