Unable to get mortgage - Live for free or pay rent?

Magenta_Wolves

Hi everyone. My husband’s in a bit of a dilemma and doesn’t really know what to do about it. Should he go with the heart or with the head?

His father died in December leaving the house to himself and his brother. His brother immediately said that his son would like the house so rather than put it on the market, we had a quick valuation and said he could have it for that price. He has since spend approx £20,000 on renovations, but unfortunately, now, like many people he can’t get a mortgage as he’s self employed.

The house is now unlived in, but we have got to start paying council tax again as it’s been over 6 months since his father died, also insurance wise, I don’t think an unlived in property is insured.

Obviously we still want him to have the house, but should we let him live there rent free and just pay the bills or charge a nominal rent to perhaps cover the interest we would be getting on our half of the sale? The heart says just let him live there, but the head is saying he could be in this situation for years.

Has anyone else found themselves in this situation, we don’t want to cause a family rift, but at the same time we don’t still want to be in this situation a few years from now.

Thanks

lonestar1

Charge him the going rate (if any maintenance is needed it can be paid for out of that) Then when things look better you could gift him the rent he's paid for his deposit (if your feeling generous of course) Dont let him live there for free (he may as well get used to paying rent - it will help him when he has to pay a mortgage) Im sure your brother would agree if you tell him what you had planned

olly300

You need to give him a reason to go and get a mortgage, so if you let him live their rent free or at a reduced market rate he won't have this incentive.

rchddap1

I'd let him live there at the going rate. If he could afford a mortgage before the credit crunch he can afford a realistic rent. As already said...there has to be the incentive for him to get on with things and not just expect things to be gifted.

If he refuses then there is always the option of renting the house on the open market. This would mean that the house is there for him when he can get a mortgage. As for the money he's spent doing the house up (if open market rent)...perhaps an arrangement can be made to put a portion of the rental income to one side for him to use as a deposit when his situation changes. However, on another note.....he really shouldn't have spent any money on it (and shouldn't have been allowed to) until the house was formally in his name.

if he lives there for free where is his reason to get the house in his name?

Premier_2

Unless I understand it incorrectly, the house was left to your husband and his brother. i.e they own half each

Your husband's brother wants to give the house to his son. Does your husband want to give up his half of the house for nothing?

If not, why not get him to ask his brother to buy him out?

If his bother can't buy him out or he can't or doesn't want to buy his brother out, sell it and split the money.

Am I right in assuming the son has spent £20k improving a house he doesn't own? :eek:

Catblue

I'd also advise selling rather than risk getting into strife with family members.

Get the EAs round for a valuation, taking into account the £20K that the nephew has put into renovating the place. When the house is sold, I would say that the nephew should keep the difference between the value before the renovations and the value now.

For example, he may have added £25K to the value of the house. He should be able keep that and use it towards a deposit for another house.

Then your husband and his brother should split the proceeds 50/50.

This situation is just going to get terribly messy otherwise.

richiebradford

As the property is joint owned by your OH and his brother then charging half the going rate for rent would be more reasonable than full rent. Would also give him a chance to save a larger deposit for when he is in a position to buy.

lonestar1

Catblue wrote: »

Get the EAs round for a valuation, taking into account the £20K that the nephew has put into renovating the place.
....
For example, he may have added £25K to the value of the house.

On the other hand he may have only added 5k to the value (maybe he's even reduced the value)

Spending money on a property isnt an instant guarantee of increasing its value