Securing a complex mortgage to support the next generation
Peter and Imogen*, a semi-retired couple with three children, have been clients of Progeny Wealth for 15 years. They recently came to their financial planner with a scenario they wanted expert advice on. Their youngest child was in his first year of university, living in halls of residence, at a cost of £900 per month. During the following 3 years he would need to live in shared rental accommodation, so the family had started to think about the financial considerations of this, and the options available.
Rather than renting a house at an estimated cost of £750 per month, or £27,000 over the three years, they considered whether it was viable to purchase a property instead, allowing him to live in his own home with friends, and get onto the property ladder earlier in life. Their planner introduced Peter and Imogen to Stephanie Thayer in the Progeny Mortgage team.
The Solution
During their initial call, Stephanie explained that as a student with no income, their son wouldn’t be able to get a mortgage of his own, and if Peter and Imogen purchased it for him, they would incur an additional dwelling supplement tax at 6%. They therefore needed to explore alternative solutions.
In the end, it was recommended that Peter and Imogen raise the funds needed via a residential mortgage on their own home. They would then loan the money to their son via a private agreement so that he could buy the property in cash and, by renting out the spare rooms to friends, he would send the rental income to his parents to cover their new mortgage repayments. Once he graduates, he can then either sell the property or take out his own mortgage, and at that point repay his parents so they can clear their mortgage in full.
It was a great solution, but with a low salary following semi-retirement, and only drawing a small monthly income through their investment portfolio, getting this new mortgage agreement was not something that most lenders would consider. This is where Progeny’s strong relationship with several non-mainstream lenders, along with a letter from the couple’s financial planner confirming their sustainable income, really helped in securing a mortgage offer. As Stephanie, their Progeny Mortgage Advisor, explains:
“I can confidently say that any other mortgage adviser would have struggled to get this outcome for their client, and that the direct link to their financial planner was crucial in this situation.”
We are happy to report that Peter and Imogen were able to purchase the new property quickly, with their son moving in ready for the start of his second year at university.
*Our client’s names have been changed to protect their identity.
Please note
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