Several options open for buying mother’s council home
I am looking to purchase my mother’s council bungalow. This is for security for my younger sister in case anything were to happen to my parents and also as an investment for myself. The problem is that I do not live at that address, I live with my partner.
However we do not have a joint mortgage as he had the property before we met so my mother’s bungalow would be my only mortgage. Is there anyone that may be able to help?
Because you do not have any existing mortgage commitments, you are effectively a firsttime buyer. In practice, this gives you several options to consider. Firstly, you could act as a guarantor for your mother’s mortgage. This means that she would buy the property in her own name, but that you would be responsible for the mortgage repayments, should she be unable to continue with them. The potential disadvantage with this is that you would not have any control over the property. However, please remember that, if your mother buys the property in her own name, she may qualify for some discount off the purchase price from the local authority.
The second possibility is a buyto-let mortgage. You would need to obtain a rental assessment, and the property would be bought in your name. Using this route, you would still be able to get a mortgage on your own residence, should you wish, but your borrowing for your mother’s property would be at a higher rate than a residential mortgage.
Last year I purchased a twobedroom flat in Harrogate under a shared-ownership scheme. I have a repayment mortgage and am considering saving for “staircasing” for the rest of the share I have available on my flat. I have just sent my lender a cheque for £1,000 as an overpayment for my capital on my mortgage. Do you think it is wise to try and reduce the capital loan I owe now or save towards staircasing?
My advice here results more than anything from the low rates of interest that are available at the moment, and the fact that it is still relatively cheaper for you to borrow than for you to save your money in a bank or building society. Given that, I’d suggest that you consider asking your lender if they would be willing to advance you the additional amount that you need to purchase the remainder of the property. That way, you’d be able to take advantage of the current market to buy your home outright at an early stage.
My parents (in their late sixties) purchased their council home now worth £100,000 plus, in 1988 with a mortgage of £9,000 and a home improvement loan of £3,000. Dad died recently and we discovered that his endowment policy had been cashed seven years ago, but alas he had not gone round to replacing it. The loans are due to be repaid in 2012 and, although we can pay the £3,000 loan, could you point us in the right direction for sorting out the shortfall of the main mortgage?
Mortgage brokers have become increasingly concerned over the number of borrowers who have cancelled endowments without arranging alternative ways to repay the capital on their mortgages.
Having said that, I think you would be wise to contact your Dad’s lenders and explain the situation. In the first instance, given the circumstances, they should agree to you converting the mortgage into a repayment, so that the capital and interest are both repaid at the end of the term.
However, you may find this option too costly in terms of monthly repayments.
As an alternative, the lender might allow you to extend the mortgage term. If neither of the above are viable, you should be able to remortgage the property, although this would mean coverting the title to the house into your names, as I assume your mother would not have an income that would sustain the mortgage.