Interesting purchase?

walesjamie86

Ok, first to set the scene - I'm 23, a staff nurse who lives at home with my mother, 60, in a two bedroom semi detached house. I am single, as is she. I dont have any brothers or sisters. This has just had an offer made on it, the asking price of £110,000. I'm going to be living at home for the considerable future, especially with the way things are with the economy. Its going to be many years before I can afford my own home although I am saving towards it. On my £20710 salary its going to take a little while.

We have found a rather special, extremely good value new build house to buy, 4 bedrooms over 3 floors it is £150,000. This is really exceptional for what it is in the area it is in. This also allows me to have my own space at home. My mother, who is also extremely keen has capital of about £28,000 in the bank, but does not wish to use this against this purchase, understandably.

My bank will give me a mortgage for the £40,000 difference, over 20 years and so the house would be put in my name. The mortgage, however, would be paid by my mother whilst she remains working, at least. If something happened to her, I could easily afford the repayments on my salary at the moment anyway. We would also have some kind of legal agreement to say I wouldn't throw her out and could live there etc.

This seems an exceptional opportunity to buy this house. Hopefully house prices will start to climb, and we will make a little money on it. Comments or suggestions?!

CarineG

walesjamie86 wrote: »

Ok, first to set the scene - I'm 23, a staff nurse who lives at home with my mother, 60, in a two bedroom semi detached house. I am single, as is she. I dont have any brothers or sisters. This has just had an offer made on it, the asking price of £110,000. I'm going to be living at home for the considerable future, especially with the way things are with the economy. Its going to be many years before I can afford my own home although I am saving towards it. On my £20710 salary its going to take a little while.

We have found a rather special, extremely good value new build house to buy, 4 bedrooms over 3 floors it is £150,000. This is really exceptional for what it is in the area it is in. This also allows me to have my own space at home. My mother, who is also extremely keen has capital of about £28,000 in the bank, but does not wish to use this against this purchase, understandably.

My bank will give me a mortgage for the £40,000 difference, over 20 years and so the house would be put in my name. The mortgage, however, would be paid by my mother whilst she remains working, at least. If something happened to her, I could easily afford the repayments on my salary at the moment anyway. We would also have some kind of legal agreement to say I wouldn't throw her out and could live there etc.

This seems an exceptional opportunity to buy this house. Hopefully house prices will start to climb, and we will make a little money on it. Comments or suggestions?!

Not sure if it is a good deal or not, you will need to have a full independant survey done for this place (different from the valuation). Often when it looks too good to be true it is because it isn't true.

I'm not trying to kill your excitement here, but just be cautious and check everything before you make a decision...

walesjamie86

Thanks for that, the house has the NHBC guarantee that we've seen and of course we will have an independent survey. The vendor next door has recently move in and all was in good order. Its more a developer on the verge of bankruptcy, and isn't an unusually cheap price, but it a 'good' price, and what could be a very good investment.

lynzpower

You seem to be saying something that might not suit your mother.

what could be a very good investment.

It is only a good investment when it is sold. Therefore in order to realise this "investmetn" you need to sell it, preferably at peak in the cycle, to maximise this investment.

You might be happy to sell up when you find a partner or you need the money for another project- or when the market hits a new peak- - what will happen to mum. Will she be happy to pull out when you are.

DVardysShadow

Does mother own the present house outright or is there a mortgage? If there is, it will make a difference.

Plus the mortgage and the ownership should be in the same names. It strikes me, you should be tenants in common with defined shares.

And always have an agreement in place about how to exit from the arrangement. Mother will only work for 5 more years, presumably. And after 10 or 15, a 3 storey house might not suit her. So the arrangement needs to be one where it makes sense to sell up and split at some point.

walesjamie86

Hi DVardy... thats exactly the plan, to have an 'exit' arrangement where for example in five years time we split. There is not mortgage on her house at the moment and she has a £110,000 offer. The tenants in common idea - so we would have 50/50 ownership? How would that affect the mortgage? Could the mortgage be just in my name? as at we are not sure if mother would get one at 60, even with an exemplary credit history.

DVardysShadow

walesjamie86 wrote: »

Hi DVardy... thats exactly the plan, to have an 'exit' arrangement where for example in five years time we split. There is not mortgage on her house at the moment and she has a £110,000 offer.

So looking to fund £40000 by mortgage

The tenants in common idea - so we would have 50/50 ownership?

You can divide it how you like - 35/93 if you want

How would that affect the mortgage? Could the mortgage be just in my name? as at we are not sure if mother would get one at 60, even with an exemplary credit history.

The mortgage is given on the house. Always the property. But the borrowers have to demonstrate they are good for the money. As you are earning, a loan of 40000 would be 2 times your income, which would be very doable - your mother would be a joint borrower.

It looks sensible to me for her to put in 110000 and to borrow 40000, for which you take responsibility - you could then agree your shares as 110/40. When it comes to selling up, the outstanding amount on the mortgage would come from your share.

You should then consider paying way over the max on the mortgage to bring the borrowings down and generate cash for you to put down on your own property.

There are many tunes you can play on this, the above is just a suggestion.

Fire_Fox

Who is going to pay the higher bills on a four bedroom home when you are used to a two bedroom?

clutton_2

""We would also have some kind of legal agreement to say I wouldn't throw her out and could live there etc.""

if the mortgage is only in one name, then this legal agreement will have little validity, as in reality the Lender owns the property and the other party will be but a lodger

CLAPTON

your mother pays the 110,000 deposit
your mother pays the 40,000 mortgage

but the house is in your name? bizarre

I would suggest that

a. the house is jointly owned, tenants in common
b. althought he mortgage should be joint, you pay the full mortgage.. as you say you can easily afford this.

then the ownership proportions should be 110,000 to 40,000 for when you split up with your share paying the mortgage off so mum is left broadly in the same position as now