Posted on 10 January 2012 by Oliver
My daughter and partner have identified a house to purchase for which they have received extensive planning permission. I wish to raise a mortgage on the property to assist them whilst they are selling their flat and doing the building work. Sale price is £275,000 and I wish to borrow £200,000 to enable the purchase. I will supply the deposit of £75,000 plus stamp duty but my name won't be on the title deeds. I have no personal mortgage and an income of approx £100,000 per annum. I am 58. Thoughts please.
You will not be able to raise a mortgage using the new property as security unless your name appears on the title deeds. It might be possible to buy the property as tenants in common with your daughter and her partner and you should take legal advice on this to ensure that you don't create problems with capital gains tax further down the line.
With a mortgage in your 3 names a lender would be able to base their calculations on your income, but the other parties would still have a joint and several liability for the mortgage payments. This means that if for any reason you could not make the monthly repayments your daughter and her partner would be contractually responsible for ensuring they were met.
This situation could run for the short term until the building works were finished and the sale of their flat had gone through. At this point they could remortgage the property into just their names and release you from your mortgage covenants and ownership.
The other way of approaching this could be to raise the funds required against your own property and buy the property for cash. This would enable the property purchase to go ahead and the building work to commence whilst they continued living in the flat. If you were to do this, the responsibility for meeting the mortgage payments would be yours and yours alone.
All lenders will want to know your intentions for the future and if it is to redevelop the property and sell it on at a profit then you will find the cost of borrowing far higher than if it is for the occupancy of your daughter and her partner as their sole residence.
I believe we can help you and that you would benefit from speaking to one of our independent mortgage advisers. Please call 0344 346 3672 and tell the consultant the date and title of your question, they will then be able to advise you fully.
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.