using family home as collateral

Hi all,
appreciate any comment on this hypothetical scenario.
myself and my hubby have been turned down for a mortgage. my mum has offered to put her own house up to help us get the mortgage.
she owns her own home and is mortgage free.
another option is she goes in as 2nd applicant with hubby.
would this work.

we are trying to find a way to own our own home.

mo

In general no, this will not work. Banks number one requirement is ability to repay, collateral only comes second. Years ago a parent could go on as a second applicant but it was their income the bank was interested in and not their property. So in present day lending it is unlikely a bank will even consider a parent as a joint applicant and certainly not if is just collateral they are offering. Why did you not qualify yourself, is it an income issue?

I didnt think I was going to get the money I needed on my own (they werent going to included my partners income at first) and AIB and BOI both said they would consider putting my fathers name on the mortgage to help us get the amount we needed. But we arent married so I dont know how that effects things

In the end my partners income was included and we didnt need to put his name on the mortgage. It was just an issue over whether she was pernament or not.

But in my case the repayments werent going to be a problem

repayments arent an issue. we have shown we can pay way over the mortgage amount every month as we pay rent and have been doing so for the past 10yrs.

its an income issue. we only have a single income of 30k basic for a family of 4 but we manage quiet well and even save 80euro a week. we pay 560 in rent and our mortgage quote was for 380pm after tax relief. loan amount would be 90k.

we also have a deposit of 10% saved plus plenty left for fees stamp duty etc.

BOI turned us down and aib wouldnt even entertain us unless we had ndi of 2500pm.

mo

Trouble is if anything were to go wrong with your income, unemployment etc, then the parent would be on the hook for the repayments. This has caused untold problems these days for loans where there is now difficulties, the parents income is affecting mortgage interest supplement and when it comes to MARP it is also a problem.

It was a common enough thing in the past but unfortunately when it goes wrong it goes badly wrong so I don't know if any banks will do it at this stage.

sillyaboutmo said:

we are trying to find a way to own our own home.

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I think you should find another way. If a bank thinks you cannot afford it, why would you risk the only asset your mother has. It's an unfair pressure on your mother for you to get what you want.

Just being blunt, we've had to many stories about how this all goes wrong. Parents in trying to do their best for their children need to look out for themselves, particulary if in later life with not many assets. If at all possible adult children should stand on their own two feet. Why don't you save for another couple of years and then purchase.

It's not just a matter of adding your current rent and savings as a monthly amount to see if it's affordable, there can be horrendous costs with house ownership.

sillyaboutmo said:

repayments arent an issue.
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BOI turned us down and aib wouldnt even entertain us unless we had ndi of 2500pm.

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AIB thinks repayments are the problem (and most likely BOI), theyve taken your income and decided it isnt enough to repay 90k. You have a proven record with rent but the banks have their own criteria/thresholds

If you arent permanent neither bank will be interested in lending you money

bronte
it was hypothetical!
My mum suggested it and i said no way right away for exactly those reasons. i said im not putting your home on the line, there are other ways. she's that good that she insisted i find out about it anyway. i also told her times have changed so much.
anyway thanks for the advise, im going to try another bank and a broker and look into rent to buy, all the while saving a bigger deposit.
Ive also been reading up on affordable housing! for my sins.

We have a modest income but we aren't looking for the moon and stars!

Mo

Its annoying paying so much for rent that could be going into something instead

I think the Affordable Housing Scheme has been discontinued but I'm open to correction.