Mortgages for Dependant Relatives – Concessionary Purchase and More
Looking after your family often means making big decisions about their living arrangements. You might be considering how to support a parent whose mortgage is ending, or you may want to provide a home for a child or another relative who cannot get a mortgage themselves.
A mortgage for a dependant relative can be a way to keep a home in the family, provide stability for your loved ones, and offer peace of mind for the future.
These types of mortgages are not always straightforward, as lenders take different approaches depending on the situation. That is where expert advice from an experienced broker can make the difference.
What is a dependant relative mortgage?
A dependant relative mortgage is a type of lending designed to help you buy or refinance a property for a family member who relies on your support. This might include:
- Elderly parents who cannot afford to remortgage in their own name
- Adult children who are not in a position to secure a mortgage independently
- Relatives with long-term illnesses or disabilities who need stable housing
Unlike buy-to-let mortgages, these are not based on rental income. Instead, the lender looks at your income and financial commitments to assess affordability as you would be responsible for making these payments for them. As a result, these mortgages are regulated as they are not investment properties.
If applicants are usually younger than the dependant relative, lenders may offer longer terms, which can help increase borrowing capacity. This would not be the case for a parent buying a property for their child.
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Who qualifies as a dependant relative?
Lenders generally consider a dependant relative to be someone who cannot live independently without support. This can include:
- Parents or grandparents that do not have much of an income
- Children or adult children without employment
- Relatives with a disability or long-term health condition
In some cases, the definition can be broader if you are funding the purchase from your own savings rather than relying on a concessionary arrangement. That might extend eligibility to cousins, aunts, uncles, or civil partners, or anyone that is dependent on you.
However, when equity is gifted as part of the transaction, lenders usually require the relationship to be very close, such as parent to child and independent legal advice should be taken by the giftor.
Can you get a mortgage if you have dependants?
Yes, you can still get a mortgage even if you already have dependants. Having children or other financial responsibilities does not stop you from borrowing, but lenders will look more closely at your income and outgoings. They will consider childcare costs, living expenses, and any other commitments to make sure the mortgage is affordable for you. If your dependant is a relative living in a separate property, it may be that you are covering their food, utilities etc, so all of this would be factored into your affordability when taking a mortgage.
Concessionary purchase explained
One common way families arrange a dependant relative mortgage is through a concessionary purchase. This is when the property is sold at a discounted price, usually from a parent to a child. Instead of a cash deposit, the equity in the home is treated as a gifted deposit.
For example, if your parent’s home is worth £200,000 but they sell it to you for £150,000, the £50,000 discount is classed as your deposit. This can be a practical solution if your parent wishes to remain in the property while transferring ownership to you. However, not all lenders are comfortable with this setup, and it’s important that you take professional tax advice to understand potential implications of money gifted.
Can you buy a house for your adult child?
Yes, you can buy a house for your adult child, but there are factors you need to consider. Tax rules such as Stamp Duty, Capital Gains Tax, and Inheritance Tax may apply, especially if you already own a property. If you gift the property, it may also be treated as a taxable gift depending on how long you live after making the transfer.
Another approach is to act as a joint borrower or guarantor on your child’s mortgage, which allows you to support them without immediately transferring ownership. This is another area where professional advice is invaluable, as the right structure can make a big difference to both affordability and tax implications.
How much can you borrow with a dependant relative mortgage?
The amount you can borrow depends on your income, financial commitments, and the lender’s criteria. Unlike buy-to-let mortgages, the borrowing is not based on expected rental income. Instead, lenders will look at:
- Your salary and any additional income such as shift allowances or bonuses
- Existing mortgage or loan payments
- Credit card balances and other financial commitments
- The number of dependants you support and the likely costs incurred
Because every lender has different affordability models, the amount available can vary significantly. At Kerr & Watson, we work with a wide network of lenders, giving you access to options you may not find on the high street.
What are the alternatives?
In some cases, a regulated buy-to-let mortgage may be considered, particularly if you are buying a property for a relative who will live there rent-free or pay less than the market amount. However, these mortgages are usually assessed on income as well and often come with higher rates than standard residential mortgages.
Another option might be a joint mortgage, where both you and your dependant relative apply together. This can sometimes increase affordability but may be limited by the age of the older applicant. This may incur additional stamp duty for you depending on your situation.
The right solution will depend on your circumstances, which is why tailored advice is so important.
Conclusion
A mortgage for a dependant relative can sometimes be the right way to provide stability for your loved ones while keeping property in the family.
The process, however, can also be more complex, with lenders applying different rules depending on the situation. From affordability assessments to concessionary purchases and alternative mortgage types, it pays to have an expert on your side.
We specialise in helping families find the right mortgage and protection solutions. If you are exploring how to buy or refinance a home for a dependant relative, get in touch with us today.
