# Mortgage Solutions podcast Episode 3

https://www.youtube.com/watch?v=QqR0nmQG7Hg

[00:02] [music]
[00:15] Hello and welcome to this family building society podcast where we'll be lifting the lid on an emerging trend of adult children helping their mom and dad or grandparents to get a mortgage.
[00:25] We'll explore the reasons behind this product availability for families who have reversed the traditional roles and the importance of innovation in this small but important sector.
[00:34] I'm Samantha Partington, freelance journalist for mortgage solutions and today I'm joined by two of family building society's mortgage experts and business development managers Neil Kadwala and Arif car.
[00:47] So the idea of parents or grandparents gifting or loaning younger family members money to get on the property ladder is common.
[00:57] It's one we're all very familiar with, but there is data to suggest that the reverse is.
[01:02] Happening too.
[01:05] So um I just wanted to find out um how common is this um and what might be the reasons um driving children or grandchildren to financially support their parents or grandparents?
[01:16] Neil, hi Sam.
[01:16] Yeah.
[01:16] So it's it's it is a growing trend.
[01:19] Um and and there's many many reasons for it.
[01:22] I mean life gets in the in the way sometimes and things happen.
[01:26] Um when you have uh I kind of people later in life uh especially if it's kind of maybe it was a husband and wife kind of combination and sadly one one person has passed away.
[01:42] Um I will go as far as saying when you're looking at people in their 60s and 70s when I I look at these type of cases invariably um uh rightly wrongly the man is the one with a big pension he's got the one with a big income uh and the and the the kind of woman stayed home and to look after the children as a as a mom and she hasn't acred it.
[02:02] Um you know you get.
[02:04] These scenarios, if, for argument sake, maybe he's passed away, she doesn't have the income and she doesn't want to move from the house she's actually in.
[02:12] I mean, we're high kind of age lender; can we go to 95 years of age on residential lending?
[02:17] Um, so why should she move out?
[02:20] And then those sort of scenarios will bring in the fact that you have kind of younger family members who can actually help by various different ways.
[02:32] Um, and it may not be that way either.
[02:34] It's not just rescuing mom or dad in the property.
[02:36] Um, we do have kind of people who decide in their 70s that have rented all their life.
[02:42] I've done two cases like this in the last three years and I love it.
[02:45] Um, you know, we've given a 25 year term to a 70-year-old person to go and buy their first home, uh, because they've rented all the life.
[02:52] So, you know, it's not all about kind of rescuing as such.
[02:55] It's also about positiveness about getting people into a new home.
[03:00] Um, but also, um, when somebody gets kind of older in life it.
[03:05] It doesn't mean they have to then sell up, downsize, that sort of stuff, you know.
[03:10] Um, one of the things that I am seeing a lot more, I'm in the southwest, it seems to happen quite a bit there, maybe kind of people kind of want to retire that direction.
[03:19] But it's two families coming together, uh, where you've got a younger family, me younger family, and they've got an kind of maybe their parents who are kind of getting, um, kind of older in age.
[03:31] They both sell up and they buy a house together.
[03:33] It may have kind of, um, an annex, two kitchens, that sort of stuff.
[03:39] You know, as long as the makeup is there, we can look at these type of things because we're manually underwritten in the background.
[03:45] But it's multigenerational lending.
[03:48] And you then have younger people with their earned income, older people with their passive incomes or incomes from assets like pensions and investments, and it all comes together.
[03:58] But there are other areas as well that we can look at as well.
[04:02] So they would all become owners.
[04:05] They'd be all on the property deeds.
[04:06] Is that?
[04:07] Right?
[04:07] That's quite in that particular scenario.
[04:08] Yes, they are.
[04:11] Um, but again, uh, whereas you could go to maybe a high street lender.
[04:13] Um, and they wouldn't take the lending past a certain age because we have that upper age limit of uh 94, 95 depending on what product they choose.
[04:24] Um, it means that everybody can go on the mortgage.
[04:26] We, we can still get a nice long term.
[04:29] So, Arif, talk us through the other option that there is if, um, younger family members want to help out the older generation.
[04:36] We see quite a bit of this, uh, especially from the demographic who took out, um, interesting mortgages, uh, along with endowments [snorts] in sort of, you know, mid to late 80s, early 90s.
[04:54] Uh, some of that demographic have paid their mortgages off, have paid it down, but there are some who still owe the high street, uh, you know, 100 grand, 200 grand, £300,000 on their mortgage.
[05:06] And unfortunately their endowments have.
[05:08] Fallen short.
[05:10] Um, and because they're retired now, they're sort of in their late 60s, early '70s, their retired incomes is not as high as their earned income once was when they were working.
[05:23] So in this instance they need help with affordability and that's where the younger generation comes in.
[05:27] Now, very um just following off from what Neil said earlier where if you got a source of incomes where an income which you don't you do not need to work for which we will which we classify as being passive income.
[05:41] We can use that income to age 95 on a repayment mortgage.
[05:46] If you're 70 years old, you got interest only mortgage, you know, and your only source of income is a couple of small pensions.
[05:53] If you got younger children who can go under mortgage but not the deeds, we can offer you a 25 year terminal repayment mortgage or 16 years on interest only mortgage and remortgage owe you from the high street, meaning you will not need to move from your house.
[06:08] Uh, because.
[06:10] Let's face it, people do want to stay where they are, uh, for as long as they can.
[06:14] Uh, because they build a community, they build a family network.
[06:19] Um, and this is a very, very popular product.
[06:20] So make no mistake, you know, joint borrower is not just for elder generation to help the younger.
[06:26] It works reverse to us as well, which is a real quirk because it can offer quite a lengthy tone.
[06:32] I suppose one of the things that, um, is really important here is that the advice that the, um, the younger borrowers would need to take because, you know, obviously they want to help out their family and it's a noble, generous thing to do.
[06:51] But they also do need to think about their own home buying journey or the impact that could have on their ability to get a future mortgage.
[06:58] So, um, how does that work?
[07:01] How do they get that advice?
[07:04] This is where the mortgage advisors, uh, who are qualified seem qualified, um, because a mortgage advisor's job and you.
[07:11] Know there there are some great great advisers out there.
[07:12] It's not just do a transaction not ask any questions.
[07:15] You need to look at sort of the next 5 to 10 years complete very far fact fines and you need to make the younger applicant aware that you're helping your parents on a joint borrow so sle proprietor you're going on the mortgage not the deeds fine.
[07:28] So if you do want to buy your own place a few years down the line, you are still a first-time buyer because you're not in the deed.
[07:35] So therefore there will be no additional stand duty payable for you.
[07:37] But the lender you want to buy a property from will factor in the mortgage commitment you are paying with you know fan boom society on your parents property which may reduce your ability to borrow a full capacity which may mean you may need to you could you can get you need to get a one bed flat not a two bed flat or maybe not get a property at all.
[07:58] So the onus to give the full uh life cycle of advice um of of such transaction lies with uh brokers.
[08:07] We're always happy to help you know we jump on we do a lot of teams and
[08:11] Zooms calls with brokers, uh, we're happy to educate and inform any that, uh, want assistance with such, uh, criteria.
[08:19] So, Family Building Society doesn't restrict, uh, family assistance or high loan to value mortgages to first-time buyers only, but many other lenders do.
[08:27] Why has Family Building Society taken that stance, Neil?
[08:34] I think it's probably, um, an historical stance if I'm totally honest.
[08:35] And, uh, when I joined, um, the Family Building Society 3 and a half years ago from a kind of high street lender, um, to say the words that I was gobsmacked at what we'd actually lend, uh, age wise.
[08:52] But the thing is though is that now I've now to concede the type of applications we get in the people we actually lend to.
[08:59] Um, it's by far one of the safest, um, demographics out there really to be honest.
[09:05] Um, that the dangers of restricting these kind of products to the market obviously shout the fact that.
[09:14] You know, we need to get people on the property ladder.
[09:15] Not everybody is going to be gifted 100,000.
[09:17] Not everybody going to be able to save 20% LTV, you know, at 20% deposit.
[09:23] And that people are locked into kind of rents, which will, you know, stop them from getting on the property ladder.
[09:33] Company, you know, kind of family building society, we're very, very used to being very comfortable with either high LTVs or high ages.
[09:44] So the combination is quite a settled one from us, and that's why we have products like the family product and also joint borrower sole proprietor.
[09:55] And we are able to take a pragmatic view on incomes, whether they be earned income or whether they be passive incomes from assets in the background.
[10:06] And so, altogether, I mean, every case, got to pick up the phone and speak to the BDM because, you know.
[10:15] Every case has a little quirk, uh, and it's nice to get those quirks out the way, um, but that's what we're used to as family BDMs.
[10:21] There's eight of us roaming around England and Wales, uh, and that's in a way used to dealing with these type of, um, cases on a day-to-day basis.
[10:31] So yeah, and and whilst I suppose it's a it's a great, um, competitive advantage to have this kind of unique set of criteria and so you don't want to obviously be having lots and lots of lenders come in and and be starting to do the same thing, but do you think that it really should be a better served part of the market, this sort of more holistic look at intergenerational lending that family takes?
[10:56] Yeah, definitely.
[10:56] Um, I don't want anybody to come in and take all take the business office obviously, but, um, you know we're and I know you kind of you switch on the television and is it when it comes to age we are an aging, um, population.
[11:10] Um, and there is a lot of, as I've said in pre on the previous podcast, that there.
[11:15] Is a lot of wealth locked up within that aging population.
[11:18] Um, and and to get younger people on the market or to accommodate older people, sometimes, uh, there needs to be that, um, that kind of ability to move and to flex with ages and incomes, um, and criteria.
[11:33] Um, so, and I just think that Family Building Society over the years, um, uh, have have got, um, a good handle on this area of lending.
[11:48] So, um, we we're very be, you know, we're best placed to to support it going forward.
[11:53] Thanks very much.
[11:53] And that's all we've got time for on this podcast.
[11:55] I'd just like to thank my guests, Neil and Arif, for their insight.
[12:00] It's been really interesting.
[12:02] And thanks to everyone for listening.
[12:05] And in case you've missed our earlier podcasts, please do go and check out our discussion on mortgage affordability and our low and no deposit.
[12:15] Mortgages.
[12:16] Thank you.
[12:16] [music]