Father and son purchase on joint mortgage sole proprietor basis

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THE SCENARIO

Many parents aspire to give their children a helping hand onto the property ladder. I was recently able to help a father and son achieve this. A client contacted me directly through our website; he wanted to source finance for his son’s first residential property, and they had already located a £650,000 property in Islington, London.

The father had originally been searching for a capital and repayment mortgage. However, when looking at the maximum term of the loan, the property’s price meant that the monthly mortgage repayments were unaffordable for the son. As his son had only recently started working, he was not able to reach the required loan amount with his income. My client was clear that he wanted a way to purchase the property with his son as the sole owner—and he wanted the monthly payments to be affordable for his son to pay by himself.

OUR SOLUTION

I advised my client to purchase on a joint mortgage sole proprietor basis. This means the lender can use the income of two applications to calculate affordability, but the legal ownership is designated to one person. This also meant that the father wasn’t due to pay any additional stamp duty, as his son would own 100% of the property. I managed to secure the loan on an interest only basis, using the father’s pension pot as a repayment vehicle. This meant the monthly payments were affordable for the son.

Securing an interest only loan on a residential property can be difficult, as most lenders will not accept sale of the property as a repayment vehicle. I found a lender who was happy with the guarantor set up of this mortgage, and were happy to consider wider assets as a repayment vehicle. I secured a very competitive rate of 2.05% on a 5-year fixed mortgage, and both father and son were extremely pleased with this outcome.