Borrowing money from a friend to buy a house

Wickedkitten

The house we're buying is 4 bedroomed, 2 bathroom and a garage ex council house. Our offer on the house is £82500. The house sold in 2006 for £117k. It needs a new boiler as it was stolen a few weeks back, and generally needs some tidying up. We believe that once the work is done, it'll be worth in the region of £100k. In great condition at it's peak, probably around £130-140k

Surely you don't seriously think adding in a boiler and "tidying up" is going to add 27.5k worth of value on an ex council house?

Pssst

Wickedkitten wrote: »

Surely you don't seriously think adding in a boiler and "tidying up" is going to add 27.5k worth of value on an ex council house?

Also,people really need to get out of this loop of,,well i bought a house for X and now it will be worth Y. Thats why the country is in the mire. Buy a house becuase it will make a nice home. The investment side is secondary.

If your friend is going to lend money perhaps it should be done more formally through a scheme such as equityshare? He would need to have an interest in the property registered at the land reg and potentially,he might be throwing you out if you dont pay!

I'd say,if you cant get a normal high street mortgage then in truth,you cant and shouldnt do the deal.

pinkshoes

littlened wrote: »

1) we've got a 20% deposit, the house is 82500, and we have a mortgage of 66000, which is 80% of the purchase price.
2) We want this house, it's a bargain, and there's literally been anything like it on the market in that price rang.
3) We want to start a family, and don't want to wait another year to move house.

I get the gist that this generally isn't a good idea so I'll knock it on the head and continue with the mortgage we have and see if we can satisfy their needs.

Firstly, wanting something and being able to afford it are two separate things.

Secondly, in your initial post, you mention that you're taking a rubbish mortgage for the first 2 years as you can only provide 2 years of accounts (and not the 3 they're asking for), then hoping to switch to something better. Then you mention you want to start a family.

So... with one of you out of work looking after a baby, so thus less money to put into the mortgage, to a house that might or might not rise or fall in value, and then re-mortgaging with potentially LESS equity than when you started, and a lower income (baby child care costs £££!)... Oh, did I mention that after a recession, interest rates could LOTS - they were 15% at one point!! Could you afford that?

Basically what I'm trying to say is that if you're struggling now, then you won't know what's hit you when a baby comes along. I would hate to see another repossession on these boards, and what you have written does hint that you could become a classic repossession candidate too!!

Just be careful, and think everything through 110%!

littlened

pinkshoes wrote: »

Firstly, wanting something and being able to afford it are two separate things.

Secondly, in your initial post, you mention that you're taking a rubbish mortgage for the first 2 years as you can only provide 2 years of accounts (and not the 3 they're asking for), then hoping to switch to something better. Then you mention you want to start a family.

So... with one of you out of work looking after a baby, so thus less money to put into the mortgage, to a house that might or might not rise or fall in value, and then re-mortgaging with potentially LESS equity than when you started, and a lower income (baby child care costs £££!)... Oh, did I mention that after a recession, interest rates could LOTS - they were 15% at one point!! Could you afford that?

Basically what I'm trying to say is that if you're struggling now, then you won't know what's hit you when a baby comes along. I would hate to see another repossession on these boards, and what you have written does hint that you could become a classic repossession candidate too!!

Just be careful, and think everything through 110%!

Thanks for your concern.

We could buy a house costing over double what we've got a mortgage for, but we're being careful and taking small steps at a time. Even at 15% this new house is affordable, we've made sure of that.

4 year ago when we bought our existing house, our friends were buying houses and paying 800-900 a month for ex council houses, but we played safe and bought a small house costing us 250 a month. A lot of our friends are in negative equity now. We've save 20% deposit, still have 15k equity in our current home and don't need to sell our home to raise the deposit. We were careful, taking a small step and it payed off.

littlened

Pssst wrote: »

Also,people really need to get out of this loop of,,well i bought a house for X and now it will be worth Y. Thats why the country is in the mire. Buy a house becuase it will make a nice home. The investment side is secondary.

If your friend is going to lend money perhaps it should be done more formally through a scheme such as equityshare? He would need to have an interest in the property registered at the land reg and potentially,he might be throwing you out if you dont pay!

I'd say,if you cant get a normal high street mortgage then in truth,you cant and shouldnt do the deal.

More assumptions....

At no point did I say we're buying the house to make a profit, I was simplying providing some information and prices in an attempt to give you as much information as possible.

If we get this mortgage sorted out, we couldn't care if the house prices drop, provided the monthly payment are affordable, which they are.

We're trying to buy a house not a money maker.

Pssst

I wasnt making a moral judgement ! I'm simply offering a different point of view as are others. this may or may not help you to make a more balanced judgement.

silvercar

What happens if you can't afford the repayments to your friend?

What happens if your friend gets into financial difficulty and someone tries to repossess the house to settle your friends debts?

maninthestreet

Do you really want to live in area where people steal CH boliers from empty house?

littlened

silvercar wrote: »

What happens if you can't afford the repayments to your friend?

What happens if your friend gets into financial difficulty and someone tries to repossess the house to settle your friends debts?

We've already decided not to go down that route

littlened

maninthestreet wrote: »

Do you really want to live in area where people steal CH boliers from empty house?

Tell me this doesn't happen in other areas?

There is no evidence to even say that the people who did it are from that estate.

The town we live in, is known as one of the poorest areas in the country, so unless we move away from the area, then we have very little choice.