£1.459 home purchase enabled by ‘Bank of Mum and Dad’
£600,000 mortgage via Bank of Mum and Dad
1.14% interest rate
Mortgage for son via joint borrower/sole proprietor arrangement
Our client, a young man on a moderate income, was seeking a way to buy a home in the location he liked, in the style he desired. He has very good earnings potential in the future, but wanted to try and maximise borrowing as much as possible now to remove the need to move at a later date.
What was needed?
With a modest income, it was unlikely that the client would be able to meet mortgage lenders affordability criteria using his sole income, so another borrowing option was needed. Rose Capital advised ‘the bank of Dad’.
What was the challenge?
The client’s father already had a mortgage on his own property and did not want to incur the tax complications of a second home. In addition, as he was 58 years old, father and son needed a lender who would agree to a mortgage term which would take the father into his later years.
How we provided the solution
Raj Bhojani, Senior Associate at Rose Capital Partners researched the market and found a solution to their needs through the commonly termed Bank of Mum and Dad.
Raj arranged a mortgage with a lender whereby the father and son would enter a joint borrower arrangement, but the son would be the sole proprietor of the property.
This meant, taking the father’s financial circumstances into account, they could buy a property for £1.495m with borrowing of £600,000, even though the father already had a mortgage on his own property.
Furthermore, the loan was organised on an Interest Only basis to keep the payments down initially, until the son’s income has increased sufficiently where he can take on the loan in his own right and switch to a repayment mortgage at a point in the future.
With only the son registered on the deeds of the property, the extra additional rate Stamp Duty was not payable, but the son was still able to purchase the property with the father’s help on the mortgage.
This is possible even though the father is 58 years old, as Raj was able to arrange a 21- year term mortgage lasting until the father would be 80 years of age.
The client was also able to save around £15k through Stamp Duty savings and the current Stamp Duty Holiday.
Being able to arrange a mortgage for a son with a modest income, through an arrangement with his father, during a Stamp Duty Holiday, is extremely beneficial for parents and adult offspring alike.
What was the rate?
The rate was 1.14% fixed for 2 years, with a £999 lender fee.
Why people choose Rose Capital Partners
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Rose Capital Partners Limited is an appointed representative of PRIMIS Mortgage Network, a trading name of Advance Mortgage Funding Limited which is authorised and regulated by the Financial Conduct Authority.