Son purchasing a property from family (Source: www.family.lovetoknow.com)
Key facts:
- Our client was a first time buyer looking to find a property in his budget and wouldn’t use up his entire life savings.
- He had been looking around for a property but wasn’t having much luck
- Coincidentally, his parents were also looking to sell a rental property that they owned.
- Finding themselves in a mutually beneficial situation, our client decided that he would like to help his parents by purchasing their property off them to use as his main residence.
- Due to the property being sold to him by a family member rather than a regular seller, a lot of lenders had issues with this.
Our client:
Our client was a 30-year old professional earning a good salary and looking to move on to the property ownership ladder. After renting a property for a few years and working hard to save some money towards a deposit, he was ready to start hunting for a new home of his own. But, he struggled to find a property that met his needs, his deposit, and his budget. His parents, who owned several rental properties themselves, were looking to sell one of their apartments. After discussing things together as a family, our client and his parents decided that they would help each other out. Our client would purchase the property off his parents and they would also help by contributing some money towards his deposit.
When our client approached his own bank, he was met by straight rejection for a mortgage on the property due to two things:
- The bank did not like the possibility that the property might be sold to him at a value less than the real market value by his parents to help him out even more.
- They did not like that the entire deposit wasn’t coming from the client’s own sources.
Unfortunately this was a common response from a lot of banks and building societies so our client came to us to see what we could do.
How did we help?
As an experienced mortgage brokerage, we fortunately had experienced similar scenarios in the past so we knew what we needed to do. Our advisor spoke with the client and got a clear idea of what his situation was, what his parents situation was, and what he was looking to do. After doing some research and consulting with other members of the time, our advisor found several lenders who were ok with our client purchasing a property from family and with part of his deposit coming from the family member too.
The lender we chose were not concerned with the property possibly being sold at below market value as they were confident in the valuation that would be carried out by their own trusted valuers and, as part of their standard criteria, they were ok with the deposit coming partially as a gift from close family members.
What was the rate?
The loan was secured as a capital repayment and interest mortgage on a fixed rate for 2-years at 2.90%. After the fixed period, they would revert to the bank’s 3.59% standard variable rate at which time we will contact the clients to discuss remortgaging on to another new competitive fixed rate.
The overall cost for comparison is 3.6% APRC. The arrangement fee was £1,499 which was added to the balance of the loan, and early repayment charges were applied. The mortgage term was 40 years.
If you or someone you know is looking at purchasing a property from family, please feel free to give our friendly advisor team a call to see how we can help you.
