My 25-year-old grandson is returning to England to buy a property after three years in Ireland, can he get a mortgage if we help with a deposit?
- Rules on applicants and their residency status vary from lender to lender
- Some lenders require applicants to have been resident in the UK for three years
- Some lenders will lend from day one when an applicant returns to the UK
My grandson is 25 years old and has worked as a freelance writer living in Ireland for the past three years.
He has decided to return to live in the north of England later this year, and we have around £40,000 for a deposit so he can buy a property.
He has recently approached Monmouthshire Building Society where he has a small amount of money, and he has also approached his bank Barclays where he has had an account for several years.
Both have told him that he needs to be resident in the UK for two years in order to apply for a mortgage. Is this a legal requirement, or just banking policy, and is there any way around it?
Rules: Some lenders require applicants to have been resident in the UK for three years before approving a mortgage
MailOnline Property expert Myra Butterworth replies: Before viewing any properties for sale, it is essential to sort out your finance, not least to know your budget and what type of home you can afford.
This is exactly what you are doing, and it means that you have time to address some of the issues that have cropped up.
Different lenders have different lending criteria and so you will need to shop around for a deal that works for your circumstances.
We speak to a mortgage broker for some suggestions about who best to approach and how much you may be able to borrow.
Mark Harris, of mortgage brokers SPF Private Clients, replies: ‘The policy relating to applicants and their residency status varies from lender to lender.
Some require the applicant to have been resident in the UK for three years, while others will lend from day one when the applicant returns to the UK.
However, it should be noted that all applications will also be subject to a credit score or profile being acceptable to the lender.
Not all mortgage lenders will accept foreign income and some will only accept sterling income
Another area that may limit the options open to your grandson is the fact that his income has been in euros.
Not all lenders will accept foreign income and some will only accept sterling income. In this instance his application would have to wait until a track record was proven and available to the lender.
Finally, the type of employment your grandson returns to in the UK can make a difference. Should he be moving to a PAYE role, some day-one lenders will find this acceptable. But if he continues down the self-employed route, that same lender may require 12 months’ evidence of income before agreeing to lend.
Based on the assumptions of a UK national returning to the UK, with euro income and who is self-employed, the good news is that there are options open to your grandson without him having to wait two years to get a mortgage.
Lenders such as HSBC would be happy to accept day-one lending and use euro income – although a discount on the income would be used for a self-employed applicant.
While no income details are provided, your grandson could use a rough 4.75 times income – if the mortgage is under 85 per cent loan-to-value – as a guide. However, at the time of application he will face a full affordability assessment.
Average house prices in the North East and North West are £163,000 ad £214,000, according to the Government’s figures for January, with Yorkshire and the Humber £208,000.
So a £40,000 deposit would prove substantial, although your grandson should allocate some of that money for the costs associated with buying a property. The good news is that as a first-time buyer he won’t pay any stamp duty on a purchase up to £425,000.