Does anybody have any advice on how much more a bank would be willing to loan to a FTB if a parent were to go guarantor? My father is willing to help us out by promising to pay the difference in mortgage repayments between what we can achieve on our own and what we could get with him as guarantor, for as long as we need him to. (I know, I am incredibly fortunate to have a father like him!)
Parent going guarantor?
- Thread starter angusweb
- Start date
normally the banks will allow a guartor to cover a small shortfall only, i.e. 50K in what you could borrow on your own. They will not lend on 100% mortgages with a guarantor. Your father will also have to have life cover assigned to the mortgage, whihc depending on his age and medical condition mat prove to be costly. He will also have to seek independent legal advise in relation to him being a guarantor. Make sure you are 100% sure this is something you want to do, and speak to a god broker for your options
Yeah, I'm sure. He has said that he wants to help us get on the first rung of the property ladder and has said that he has the choice of re-mortgaging an investment property to get the money or acting as guarantor on our mortgage - if this will get us the amount we need (about 20% more than we can get on our own). He would prefer to act as guarantor as it is a lot less hassle from his point of view
A parent can go as joint borrower (as opposed to guarantor) for the sole purpose of assisting their child to purchase a property without affecting the child's FTB status however the level of borrowing over and above the child's individual borrowing capacity will depend on the parent's own income and their mortgage and/or other borrowings.
Sarah
www.rea.ie
Sarah
www.rea.ie
Far be it from me to second guess you on mortgage issues Sarah (aka "with all due respect..."Sarah W said:
) but are you sure about that? Wouldn't the parent then be a joint buyer and presumably a non FTB in which case the parent and child would be jointly classed non FTBs?From revenue.ie;
"What is the position where the purchase monies are not provided entirely by the first time buyer?
To qualify for the relief the entirety of the purchase monies, including any borrowings, must be provided by the first time buyer. Any person, who provides part of the purchase monies or who is a party to any borrowings relating to such purchase, is also regarded as a buyer of the house and the relief will not be available unless that other person is also a first time buyer. …
The basis for this treatment is that, in such circumstances, the house is held for the person providing the monies used in the purchase of the house by way of a resulting trust presumed in favour of that person. This treatment applies whether or not all the parties providing the purchase monies, or all the parties to any borrowings, are actually named in the deed of transfer.
Notwithstanding this treatment, to take account of particular situations, Revenue is prepared to accept that a child, who is a first time buyer, will not be precluded from claiming first time buyer relief where a parent acts as a co-mortgagor in the following circumstances:
The transfer of the house is taken in the name of the child.
It is the intention of both the child and the parent that the parent is not to take a beneficial interest in the house.
The parent has been joined into the mortgage solely at the request of the lending institution for the purpose of providing additional security for the monies being advanced for the purchase.
It is not intended that the parent will be contributing to the repayment of the mortgage in the normal course.
Where the four conditions set out above are satisfied, Revenue will treat the parent as effectively acting in the role of guarantor for the loan.
Consistent with the above approach, Revenue will also be prepared to treat persons other than parents of the first time buyer, who satisfy similar conditions to those set out above, as effectively acting in the role of guarantor for the loan. Their involvement in that capacity will not be treated by Revenue as precluding a claim to first time buyer relief. In such circumstances the conditions are as follows:
The transfer of the house is taken in the name of the first time buyer.
It is the intention of both the first time buyer and the other person that the other person is not to take a beneficial interest in the house.
The other person has been joined into the mortgage solely at the request of the lending institution for the purpose of providing additional security for the monies being advanced for the purchase.
It is not intended that the other person will be contributing to the repayment of the mortgage in the normal course.
The relief from stamp duty is intended to benefit only genuine first time buyers and Revenue will continue to use our audit programme to ensure that there is no abuse of the relief.
What is the position in the case of a gift of part of the purchase monies?
Where a first time buyer receives an unconditional gift of monies which are used to purchase a house, he/she will not be precluded from claiming first time buyer relief."
Don't mess with me Clubman!
Sarah
www.rea.ie
"What is the position where the purchase monies are not provided entirely by the first time buyer?
To qualify for the relief the entirety of the purchase monies, including any borrowings, must be provided by the first time buyer. Any person, who provides part of the purchase monies or who is a party to any borrowings relating to such purchase, is also regarded as a buyer of the house and the relief will not be available unless that other person is also a first time buyer. …
The basis for this treatment is that, in such circumstances, the house is held for the person providing the monies used in the purchase of the house by way of a resulting trust presumed in favour of that person. This treatment applies whether or not all the parties providing the purchase monies, or all the parties to any borrowings, are actually named in the deed of transfer.
Notwithstanding this treatment, to take account of particular situations, Revenue is prepared to accept that a child, who is a first time buyer, will not be precluded from claiming first time buyer relief where a parent acts as a co-mortgagor in the following circumstances:
The transfer of the house is taken in the name of the child.
It is the intention of both the child and the parent that the parent is not to take a beneficial interest in the house.
The parent has been joined into the mortgage solely at the request of the lending institution for the purpose of providing additional security for the monies being advanced for the purchase.
It is not intended that the parent will be contributing to the repayment of the mortgage in the normal course.
Where the four conditions set out above are satisfied, Revenue will treat the parent as effectively acting in the role of guarantor for the loan.
Consistent with the above approach, Revenue will also be prepared to treat persons other than parents of the first time buyer, who satisfy similar conditions to those set out above, as effectively acting in the role of guarantor for the loan. Their involvement in that capacity will not be treated by Revenue as precluding a claim to first time buyer relief. In such circumstances the conditions are as follows:
The transfer of the house is taken in the name of the first time buyer.
It is the intention of both the first time buyer and the other person that the other person is not to take a beneficial interest in the house.
The other person has been joined into the mortgage solely at the request of the lending institution for the purpose of providing additional security for the monies being advanced for the purchase.
It is not intended that the other person will be contributing to the repayment of the mortgage in the normal course.
The relief from stamp duty is intended to benefit only genuine first time buyers and Revenue will continue to use our audit programme to ensure that there is no abuse of the relief.
What is the position in the case of a gift of part of the purchase monies?
Where a first time buyer receives an unconditional gift of monies which are used to purchase a house, he/she will not be precluded from claiming first time buyer relief."
Don't mess with me Clubman!
Sarah
www.rea.ie
I don't *think* so as long as the parents are going on the mortgage and not the title deeds but you might want to check with revenue. Again it would depend on the father's income and committed outgoings however contractors are not discriminated against in terms of their borrowing capacity as long as they can show a solid employment (PAYE, contract or self employed) history and ongoing earning capacity.
Sarah
www.rea.ie
Sarah
www.rea.ie
Thanks for the clarification Sarah - I was indeed reluctant to mess with you in case you came climbing over my back wall some dark night!Sarah W said:Don't mess with me Clubman!
So just to clarify, there are 3 ways in which a parent can help out a child who wants to buy a house
1. Parent goes guarantor
2. Parent goes on the mortgage
3. Parent goes on the title deeds
Or are option 1) and 2) the same thing??
Also I presume that the greater degree of commitment from the parent - the greater the mortgage that will be offered taking into account the parent's income??
1. Parent goes guarantor
2. Parent goes on the mortgage
3. Parent goes on the title deeds
Or are option 1) and 2) the same thing??
Also I presume that the greater degree of commitment from the parent - the greater the mortgage that will be offered taking into account the parent's income??
ClubMan said:Thanks for the clarification Sarah - I was indeed reluctant to mess with you in case you came climbing over my back wall some dark night!
Wrong Sarah Clubman. I always carry a fold up ladder for such eventualities.......
Sarah
www.rea.ie
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<P>Sorry, this is getting a bit confusing, what is the difference between co-mortgager and guarantor?! Or is there a difference at all?
I'm assuming that a guarantor is somebody who isn't intending to regularly pay anything towards the mortgage, and a co-mortgager does intend to do this?
</P>Sarah W said:
<P> </P>
<P>Sorry, this is getting a bit confusing, what is the difference between co-mortgager and guarantor?! Or is there a difference at all?
I'm assuming that a guarantor is somebody who isn't intending to regularly pay anything towards the mortgage, and a co-mortgager does intend to do this?
I searched for quote on the search facility and it had me writing a bit of html script...I guess I need some more practice at spotting the easy buttons right under my nose!
Dr Wizard...I am assuming then that if a parent were a co-mortgager then they would automatically have to go on the title? Is the title the same thing as the deeds?! You'll have to excuse my ignorance, but we all have to start somewhere!!!
Thanks everybody for your input thus far, it has been invaluable
Dr Wizard...I am assuming then that if a parent were a co-mortgager then they would automatically have to go on the title? Is the title the same thing as the deeds?! You'll have to excuse my ignorance, but we all have to start somewhere!!!
Thanks everybody for your input thus far, it has been invaluable
A joint borrower need not go on the title deeds (and indeed if they did there could be SD and CGT liabilities if the parent weren't a FTB). A guarantor is typically liable only for the debt over and above the amount the borrower would qualify for on their own. So if John jnr could only borrow €230k but John snr had 'spare' income to cover a further €50,000 jnr could get a mortgage of €280,000 but John snr's liability would be limited to the €50,000 (plus any costs/interests if it all went pear-shaped). If John snr went as a joint borrower but didn't go on the title he is liable for the whole debt but has no legal right to the house - if he went on the title deeds, as mentioned before, it forfeits John jnr's FTB status.
Clubman - my reputation is exactly where it should be
Sarah
www.rea.ie
Clubman - my reputation is exactly where it should be
Sarah
www.rea.ie