The Mortgage Clinic: 'Was I right to borrow on behalf of mum?'
Wednesday 23 May 2007
'Last year, my mother was unable to arrange a mortgage because, even though she is in a well-paid job, she is in her late 50s. To rectify this I took a joint mortgage with her. Now my boyfriend and I want to buy our own home. Will my name being on a mortgage already jeopardise our application?' SH, by e-mail
Quite a few younger people buy jointly with a parent to get on to the housing ladder. Your situation is rather less common, and it could be that your mother received bad advice. There are lenders that will grant mortgages to people in their 50s.
There are inheritance tax advantages to owning the property jointly with your mother, but you need to weigh these against the difficulties the arrangement will cause you in sorting out your own mortgage.
You should start by taking independent legal and financial advice. Your mother is not old, so she might well be able to find a mortgage based on her income (and possibly her pension). By the same token, hopefully the issue of inheritance (IHT) is some way off. You could also investigate whether you could take your name off the mortgage now, but stay on the deeds for IHT purposes. If that is not possible, you should still be able to find a mortgage, but the amount you can borrow might be lower than you would like. You and your mother are "jointly and severally liable" for the mortgage and your position depends on how a lender views that commitment.
At worst, a lender might expect your income to cover both mortgages. But, according to Cath Hearnden, partner at mortgage brokers My Mortgage Direct, some will simply deduct the sum from your income, as they would with another regular commitment, such as a loan. But they will do this, regardless of whether or not you actually pay anything towards your mother's loan.
If you have a good credit score – and being on your mother's mortgage will help you here – then a lender that uses affordability rather than salary multiples might give you more flexibility.
And, if you're buying with your boyfriend, ask your mortgage broker to look at loans based on three times or three and a half times the first applicant's salary plus the second, rather than simply two and a half times your joint income. That could also reduce the impact of your mother's mortgage on your buying power.
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