Mortgages.scot

At some point most parents expect there could be a time when purchasing their first home it may need bank of mum and dad to help. Far less expect that one day they may even need to put themselves on the mortgage as well. That's what one visitor is considering.

My daughter is fairly well paid, she is looking at her first home but has had a few credit issues in the past. Usual things, a couple of missed or late payments in her early youth and some more during COVID due to salary reductions. She is in a good job and has been for 18 months now. The only mainstream lenders that will look at her to the point of offering a mortgage will only do so if I am a borrower with her. They don't even need my income, hers is fine, it's just her credit record they are citing. I understand that I will need to pay if she doesn't and it will impact my credit record as I have a mortgage myself. Anything else I am missing?

I am slightly curious why they specifically want you to be a borrower, especially if not for affordability. Providing a personal Guarantee (PG) should be fine for most lenders. You don't mention the provider so it will need to remain a curiosity.

Risk of non-payment

You already know this one. You are fully responsible for the mortgage payments as they fall due each month should your daughter not pay. That's the main issue here. If your daughter was to lose her job and couldn't pay for 12 months, can you? That is the question I would be asking myself.

It may be that long but I think that is a reasonable term you should consider to be safe. It gives time for planning in that should it take that long then alternatives may need to be looked at. Selling the property for example.

Impact on your credit rating

If the payments are not missed then it will ultimately have a positive rather than a negative effect. But you are risking your own rating should payments get missed or even be late. What's your future credit plan? Will you need borrowing or another mortgage in time? Issues created from a mortgage with your daughter may make it more difficult or costly to borrow in the future for you.

Losing your own home

Worst case scenario. What if it gets to the point her property is repossessed and there is a shortfall. If she has nothing but you have equity in your own property, that may be where they go to recover it resulting in you losing your own home.

That really is worst case, only you know how realistic that could be.

Summary

I believe those are the three main points to consider. Everything else in my mind is a byproduct from the payments being missed or worst case scenario the property being repossessed. You already understand those scenarios.

It's difficult and I have to say I would probably do it for my children, well one of them if they needed it, not all three!

Tough decision certainly, I don't envy your position. Ultimately you need to look at the what if your daughter can't pay and you will need to make the payments. How long can you do that for, where do you draw the line?