Advice needed buying house from wife's brother over several years

Ginric99
Ginric99 Posts: 3 Newbie
in Mortgages & endowments
Hi al just trying to get some initial info before we go to solicitors really.

The situation is as follows, my wife's brother owns the old family home (having bought her and her brother out of there share when the estate was all sorted following there fathers death). He is now looking to sell and we would like to buy it off of him.

However due to various issues the last few years our credit rating is shot and so we are unable to get a new mortgage. Therefore what we have discussed is the following.

Get a valuation of the house as it is now
Sell our house (has around 45k equity in it)
Pay her brother a lump sum from the equity as a payment. We believe around 30-35k will cover the equity he has in the house.
Agree to continue making mortgage payments either to him or direct to the mortgage company if they will allow a third party to do that. However the house stays in his name.
In a few years time when we are able to get a mortgage take out a mortgage to cover the remaining mortgage amount and take over the house.

We will get a solicitor to draw up an agreement and her brother will also refer to this in his will. We will also be responsible for insurance (contents and buildings)

So my question does anyone see any issues with this at all?

Comments

  • muhandis
    muhandis Posts: 994 Forumite
    First Anniversary Name Dropper Combo Breaker First Post
    Assuming that your wife's brother has a residential mortgage, I think one of the conditions is that he has to be living in the property. I can't see them viewing the arrangement that you have described in a favourable manner.

    Ginric99 wrote: »
    Hi al just trying to get some initial info before we go to solicitors really.

    The situation is as follows, my wife's brother owns the old family home (having bought her and her brother out of there share when the estate was all sorted following there fathers death). He is now looking to sell and we would like to buy it off of him.

    However due to various issues the last few years our credit rating is shot and so we are unable to get a new mortgage. Therefore what we have discussed is the following.

    Get a valuation of the house as it is now
    Sell our house (has around 45k equity in it)
    Pay her brother a lump sum from the equity as a payment. We believe around 30-35k will cover the equity he has in the house.
    Agree to continue making mortgage payments either to him or direct to the mortgage company if they will allow a third party to do that. However the house stays in his name.
    In a few years time when we are able to get a mortgage take out a mortgage to cover the remaining mortgage amount and take over the house.

    We will get a solicitor to draw up an agreement and her brother will also refer to this in his will. We will also be responsible for insurance (contents and buildings)

    So my question does anyone see any issues with this at all?
  • Ginric99
    Ginric99 Posts: 3 Newbie
    He isn't living at present and has never lived there has a buy to let mortgage as was renting it out so don't see that being an issue.
  • amnblog
    amnblog Posts: 12,435 Forumite
    First Anniversary Name Dropper Photogenic First Post
    He cannot have family in the property with a standard buy to let mortgage. Nor can he sell a chunk to you whilst it is mortgaged.


    Also, I am a bit baffled why you would pay him £45K to cover his equity of £35K and then pay him further funds after that.
    I am a Mortgage Broker

    You should note that this site doesn't check my status as a Mortgage Broker, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice.
  • Ginric99
    Ginric99 Posts: 3 Newbie
    No we will pay him 30-35 depending on valuation then keep the remainder for ourselves we won't then pay him a lump sum just clear whatever is left on the mortgage.

    Mortgage company won't know what our agreement is though surley? Wife is a different surname and I would have thought we are basically just buying a share in the property. As long as we haven't bought more then the equity plus mortgage is worth then no issues. The value will never drop so the house is worth less then the mortgage amount.
  • davidmcn
    davidmcn Posts: 23,596 Forumite
    Name Dropper First Anniversary First Post
    Ginric99 wrote: »
    we are basically just buying a share in the property.
    But you're not - you're just giving him cash in the hope that eventually he'll transfer the house to you. In the meantime he retains 100% of the ownership. What are you going to do if, say, he goes bankrupt in the meantime?
  • Thrugelmir
    Thrugelmir Posts: 89,546 Forumite
    Name Dropper Photogenic First Anniversary First Post
    One hurdle to overcome is that the money you pay him will be construed as rent in his hands. Therefore taxable. However you structure the arrangement. The HMRC will deem it to be avoidance.
  • JimmyTheWig
    JimmyTheWig Posts: 12,199 Forumite
    Name Dropper First Post Combo Breaker First Anniversary
    Why not...
    Sell your house and put the equity into your savings account.
    Then rent the family home from your brother in law. Monthly rent could match the monthly mortgage payments with an agreement that said that you were responsible for any costs incurred by him as a landlord.
    When you are ready, get a mortgage and buy the house from him.
  • Kynthia
    Kynthia Posts: 5,666 Forumite
    First Post First Anniversary Combo Breaker
    Would it not be best he transfer the property to your name and pay off his mortgage? Then he could register the debt against the property like mortgage companies do so he has proof of the debt you owe. That way you won't be viewed as tenants, he won't be charged tax on your payments as if they were rent, and he won't be breaking tge terms of his mortgage by having family live there.
    Don't listen to me, I'm no expert!
  • MortgageMamma
    MortgageMamma Posts: 6,686 Forumite
    First Post First Anniversary Combo Breaker
    How do you know you can't get a mortgage? have you taken professional advice from a whole of market mortgage broker? I see people do this all the time, assume they can't get a mortgage because of credit issues when in reality they can if they have the right deposit.
    I am a Mortgage Adviser

    You should note that this site doesn't check my status as a mortgage adviser, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice.
  • Yorkie1
    Yorkie1 Posts: 11,552 Forumite
    Name Dropper First Post First Anniversary Combo Breaker
    JimmyTheWig wrote: »
    Why not...
    Sell your house and put the equity into your savings account.
    Then rent the family home from your brother in law. Monthly rent could match the monthly mortgage payments with an agreement that said that you were responsible for any costs incurred by him as a landlord.
    When you are ready, get a mortgage and buy the house from him.


    As previously mentioned, this is against the T&Cs of the BIL's BTL mortgage
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