selling our house with a difference - HELP!

eldbs

Hi there,
My wife and I would like to sell 50% of our property to a friend who wants to get on the property ladder (shared Ownership), but can't afford it, and rent the remainder to her, with options for her to buy the remainder in the future, similarly to the Housing Assosciation schemes out there.

The idea is, that the value of half the house will be enough for us to put a deposit on another house (we were looking to move anyway) and the rental income will cover the mortgage on the remainder that we own.

Does anyone know anything about setting up something like this, legal implications, costs involved, who to talk to, advantages /disadvantages?

Basically any help gratefully recieved.

Kind regards,

eldbs

Ian_W

I don't know anything about this from experience but I think your first port of call might be a mortgage broker to see if it is possible for both parties to raise finance on the one property. Normally all the people named on the deeds have to be on THE mortgage, seems to me if you each want a separate mortgage that might be difficult.
There are lenders that do shared ownership mortgages but one of the parties is usually a corporate body like a HA or Builder. In addition unless you can use a BTL mortgage for your half of the property it's going to affect your borrowing ability [income to loan] on your new property.
Not the answer you may want but hope it helps anyway.

mountainofdebt

such as who's responsible for house repairs, what happens if your friend wants to move but hasn't bought the rest of the property.

Also what about the tax implications for you when you sold the remaining half of the property?

Strangely enough there was a question similar to yours today on the radio 4 programme money box where one of the questions was where a mum wanted to do something similar with her son. I think (and I stress I think) one of the pitfalls was that the mortgage would have to be a joint one. You can listen to the programme again to by going to http://news.bbc.co.uk/1/hi/programmes/moneybox/4900148.stm.

eldbs

Thank you both for your replies, I am just listenin to the radio 4 programme now.

However I think I maybe didn't explain enough about what I want to do, and I'll try and explain again.

Basically I want to sell 50% (although the actual percentage may change from this) of the house freehold, and effectively sell 50% of the house on a long-term lease (hire-purchase) type contract.

So all the risk (maintenance/repairs etc) is transferred to the person I am selling to as if they had bought the whole house, however they have effectively put down a 50% deposit and pay the remainder over an agreed period of time.

There are a few other options that I may consider:
- sell part of the house and lease the remainder (with the option to buy increasing parts of it at yealry intervals subject to market valuations)
- sell part of the house and set up a hire-purhcase contract on the remainder of the house.
- Set up a hire-purchase contract on the entire house ( small deposit, low monthly payments), but they 'own' the house unless they stop paying me.

Any one out there got any experience of any of these options, or know who I should talk to get advice about the pros /cons of each.

Thanks again for any advice.

eldbs

irnbru_2

eldbs wrote:

So all the risk (maintenance/repairs etc) is transferred to the person I am selling to as if they had bought the whole house, however they have effectively put down a 50% deposit and pay the remainder over an agreed period of time.

Your're asking the buyer to take 50% of the house but a 100% of the repairs. Any solicitor would immediately warn the client of this risk.

I think changing the mortage to a buy-to-let in which one party is both buyer and letter should be an option.

Both parties would be liable for the mortage.

Both own 50% but one party solely reliable for the rent.

You get a solicitor to draw up the documents dealing with how the house is managed (sub-letting etc) and disposed in case of default.

The downside is the increased cost of the buy-to-let mortage for your friend.

eldbs

Hi irnbru,

Thanks for the response, please don't get me wrong, I'm not trying to con my friend, merely trying to replicate the schemes that many housing assosciations offer at the moment. However in our area the housing assosciation schemes are few and far between.


As far as I can see the advantages to the purchaser are significant, including:
an opportunity to get on the property ladder,
small deposit,
no stamp duty (or at least deferred stamp duty),
options to increase ownership if their situation changes in the future,
affordable mortgage.

The disadvantages are:
slightly higher cost than if they were able to buy it outright (as they will nedd to repay their mortgage + rent to us),
responsibility for maintenance etc for the whole house, but technically only owning half of it.

Please keep the advice coming :-)

eldbs

thebuff1

Hi there
I love your idea and whilst some might suggest that you are being greedy and unrealistic, why on earth shouldn't you try and help someone out? I dont know about anyone else but I have heard several stories of kids/relatives selling homes of the deceased and holding out for top whack just because they can. I have always hoped that when my time comes, I will be able to help someone out if I can.

My concerns about your scheme are as follows:
I would advise your friend to look at some of the schemes available and see what she would be expecting if she did this via a 'commercial route' my rational is that she then would see that you are offering a fair deal (hopefully!)

We have just got out of a scheme with an ownership scheme based in London. To cut a long story short, after 6 yrs with them paying mortgage and rent monthly, we looked into 'staircasing' which means buy more than the 50% we had in the property.

We realised that we were somewhat over a barrel as we did heaps of improvements but as the market has also gone up we were 'allowed' a discount of 20K in respect of the value that our improvements had influenced the current market value.
Our choices were, to continue paying rent and mortgage, staircase thus get a mortgage for half the current market value (less the 20K) or sell completely and pay the shared ownership company HALF of the sale price thus 'losing' at least 10K. Needless to say we took the staircase route so we now 'own' our home and pay just the mortgage each month and are free to do what we wish with it.
I would say the advantages were that it gave us a chance to get onto the property ladder when despite getting a mortgage and paying rent, we were not able to get a mortgage for the whole amount at the time.
The building insurance was included in the rent.


Disadvantage-It was frustrating knowing that some faceless compnay was benefitting hughely for the work that we did and we paid them rent and admin costs to do so!
Having to split the market value at the time of sale.

We were also warned not to go for shared ownership on new properties as the rental costs can be really high.

We are now looking into keeping the property, renting it to the local authrity and buying a different house so if that works out we'll be really happy, if not then at least we still have a roof over our heads!

ALthough this doesn't answer the mortgage question, hope it was helpful. We also had excellent advice from Barry Davis barry@lighthouse-services.info
Good luck

eldbs

Thanks for your helpful response theBuff1,

I think you understand what I am asking :-)

I'm trying to contact a solicitor who has experience of this at the moment, but everyone seems to be on leave this week.

If anyone has any actual experience of this from the sellers side, I would really appreciate it, as I can only seem to find information from the buyers side of things on line.

Thanks again.

eldbs