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  • FIRST POST
    • Dollyrotter
    • By Dollyrotter 11th Jun 17, 7:54 AM
    • 3Posts
    • 1Thanks
    Dollyrotter
    How can I help my poor credit-rated brother buy a house?
    • #1
    • 11th Jun 17, 7:54 AM
    How can I help my poor credit-rated brother buy a house? 11th Jun 17 at 7:54 AM
    I'm due to re-mortgage in the Autumn (I owe around £75k on a £250k house). My brother is currently renting a place but has a poor credit rating. The area he lives in has cheap housing - a £60k house would suit him fine - but there is no way he can get a mortgage from a bank. I'd like to help.

    What are the implications of:
    I remortgage for £135k, giving me £60k cash
    I gift him £60k cash for him to buy a house.
    He buys a house and moves in.
    He sends me £300 a month, covering the additional mortgage cost, for the duration of my mortgage.

    Specifically; is this legal? What tax/fees would we have to pay? Is there a better way of doing this?

    And yes, I am aware that at any point he could just refuse to pay me any money and there's nothing I can do about it.
    Last edited by Dollyrotter; 11-06-2017 at 7:55 AM. Reason: Edited for spelling.
Page 1
    • getmore4less
    • By getmore4less 11th Jun 17, 8:12 AM
    • 28,776 Posts
    • 17,210 Thanks
    getmore4less
    • #2
    • 11th Jun 17, 8:12 AM
    • #2
    • 11th Jun 17, 8:12 AM
    There will be the money/family don't mix people come along soon

    listen to them.

    Can you afford the payments if he does not pay?

    If not then it is a non starter.

    one route......
    Don't gift, lend him the money.
    Make sure the loan agreement has payment terms so it is enforceable.
    have clauses that cover non/delayed payment.
    Take a charge on the property to stop him selling it and running off with the money or gifting it to someone else(alive or dead).

    If you charge him interest then that is taxable income for you even though it is paying interest on your new debt.

    £300pm for £60k is nearly 17 years do you want this financial commitment to go on this long?
    (longer if you charge interest)

    Will he be able to afford to maintain the place?
    • worried jim
    • By worried jim 11th Jun 17, 8:48 AM
    • 8,197 Posts
    • 12,427 Thanks
    worried jim
    • #3
    • 11th Jun 17, 8:48 AM
    • #3
    • 11th Jun 17, 8:48 AM
    He is your brother and you are able to do it so help him- however be prepared to never see the money again, if you are fine with this then go for it.

    If you do get the money back and it doesn't tear the family apart in the process- bonus.
    "Only two things are infinite-the universe and human stupidity, and I'm not so sure about the universe"
    Albert Einstein
    • Number75
    • By Number75 11th Jun 17, 9:10 AM
    • 149 Posts
    • 163 Thanks
    Number75
    • #4
    • 11th Jun 17, 9:10 AM
    • #4
    • 11th Jun 17, 9:10 AM
    I would look into doing it as a BTL, although I think there can be issues with BTL where the tenant is family - for all the reasons that people will give you about family and money not mixing!

    Yes, you'd pay stamp duty and yes you'd pay tax on the income. But your investment would be more secure. I would calculate his rent to be enough to cover your mortgage and the tax. If you get a 2 bed, could even work well for him if you allow him to sublet the second room with a lodger (tax free under rent a room allowance). Not sure what's allowed with BTL conditions though.

    The thing to me is this - say you think the worst case is your brother stops paying you and you lose £60K, paying back a mortgage with no income and your brother happy as a pig in s*** in your house. Can you live with that? Maybe.

    Now think about other worst case scenarios, because this is a long term commitment. 10 years time. He's been married and now he's splitting up with a woman who has treated him terribly, refused to do a days work since she married him and has had multiple affairs under his nose. And she's about to walk away with 50% of the house that you're still paying for. Does that feel comfortable?

    There's no way I personally would just give a house to a sibling - especially if I didn't have the money outright to do so.

    Even if you pay more to do so, I would retain ownership.
    • Dollyrotter
    • By Dollyrotter 11th Jun 17, 9:30 AM
    • 3 Posts
    • 1 Thanks
    Dollyrotter
    • #5
    • 11th Jun 17, 9:30 AM
    • #5
    • 11th Jun 17, 9:30 AM
    Thanks for the feedback everyone. Believe me, the "money and family" factor is a huge issue for me, but I wanted this thread to be about logistics as this is an area I don't have expertise. I've got plenty of sounding boards for advice on loaning to family. There is a good chance it won't happen, but I want to explore the best way to do it if it did.

    I like the idea of a written contract for a £60k loan. (I have no interest in having the house in my name). I believe the implications there are that I would pay tax on the interest. Is there anything I've missed? Or are there any more ideas?
    • csgohan4
    • By csgohan4 11th Jun 17, 10:12 AM
    • 3,481 Posts
    • 2,163 Thanks
    csgohan4
    • #6
    • 11th Jun 17, 10:12 AM
    • #6
    • 11th Jun 17, 10:12 AM
    get your brother to help himself, understand himself why he has a poor credit rating? spending beyond his means.
    "It is prudent when shopping for something important, not to limit yourself to Pound land"
    • Dollyrotter
    • By Dollyrotter 11th Jun 17, 10:19 AM
    • 3 Posts
    • 1 Thanks
    Dollyrotter
    • #7
    • 11th Jun 17, 10:19 AM
    • #7
    • 11th Jun 17, 10:19 AM
    get your brother to help himself, understand himself why he has a poor credit rating? spending beyond his means.
    Originally posted by csgohan4
    This isn't the sort of advice I'm looking for. I'd like advice on different ways I can help him buy a house. His previous decisions are not a concern on here. Those discussions took place a long time ago.
    • getmore4less
    • By getmore4less 11th Jun 17, 10:21 AM
    • 28,776 Posts
    • 17,210 Thanks
    getmore4less
    • #8
    • 11th Jun 17, 10:21 AM
    • #8
    • 11th Jun 17, 10:21 AM
    what rent is he paying ever been any issue with rent payments?
    job history.
    cash flow problems
    claiming benefits etc.
    make sure you see all the credit records.

    By using a secured loan you just become the lender just like any other mortgage**.
    To cover your tax liability you could charge a higher rate of interest that you pay because of your LTV.

    Your fall back is repossession just like a lender.
    there is good reason lenders like things like deposits job history etc.

    If you buy the house you become the landlord along with all the assocoated hassle
    your fall back is eviction

    **
    Might be worth looking at how shared equity get around the responsibilities of a landlord and retain the interest in the property renting out that bit without ANY costs passing all of them onto the other owners.



    .....

    You have to find a lender willing to do this your current one may not so you may want to consider a broker
    • Pixie5740
    • By Pixie5740 11th Jun 17, 12:09 PM
    • 10,390 Posts
    • 14,228 Thanks
    Pixie5740
    • #9
    • 11th Jun 17, 12:09 PM
    • #9
    • 11th Jun 17, 12:09 PM
    Lend him the £60k to buy a property and place a charge against the property only to be removed once he has repaid you. That leaves him responsible for the repairs and maintenance of the property and is more tax efficient than you becoming his landlord.

    If your brother is in receipt of benefits he should check how such an arrangement (private mortgage) with you could impact those benefits. For example, if he currently receives housing benefit he would no longer be eligible to claim it.
    Annual income twenty pounds, annual expenditure nineteen pounds nineteen and six, result happiness. Annual income twenty pounds, annual expenditure twenty pounds nought and six, result misery.
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