Advice with 50/50 Split Mortgage etc.

Gompo

Hi guys.

I'm thinking about buying a house with my brother. I would live in it, but it would be mainly as an investment for both of us. However, we're not sure how we can split the mortgage with regards to payments.We want to do a 50/50 split in terms of ownership but have different amounts of capital and we want to do each 50% as seperately as possibly if that makes sense.

My 50% =

40% deposit, 10% needed to borrow.

Brothers 50% =

10% deposit, 40% needed to borrow.

There should be no problem with borrowing (the 50% in total) what we need, it's not a massive amount - but basically I could probably borrow the 10% I need either via a loan or even my family if desperate, and this would avoid me being part of the 50% we need in total/40% my brother needs. I can obviously pay back the 10% quite quick, so dont want to be part of the same terms as my brother as, of course, it'll take him longer to pay back 40%.

..So, any advice really? I've worked/saved bloody hard for my deposit so dont want to waste it. My brother wasnt so careful at my age but has now gotten better and wants to do something for the future.

Cheers..

benjo

Just guessing here, since Im not clear if you are asking a specific question or just general feelings, Im not a mortgage advisor, but recently went through the house buying process and this is how it was explained to me...

The issue of who owns what part - should be sorted by a solicitor, so that if/when you come to sell there is a clear ownership of profits % or loss%.

As far as a lender is concerned, I guess they wont really care which one of you puts in which % of the deposit, you will both be borrowing the full amount you are borrowing - you say your brother needs to borrow 40% since he has 10% deposit and you have 50% from other sources - the lender (as explained to me) will want you to both be jointly and severally liable for the full amount borrowed against the property.

If you brother borrows that amount (40% of the house value) on his own there might be some issues with the lender about putting your name on the title. But Im sure someone here can explain that better than I can.

As for who pays the mortgage afterwards - well technically, if your brother is borrowing his half, you may say he should pay. But then if you are living in the house, you would expect to pay some rent, dunno how you sort that one out.

Not a very technical explanation and really only my understanding of how it was explained to me. Goodluck.

g_attrill

Does he have a place of his own already, and/or live with a partner? What if he needed the money in the future and wanted to sell his half, could you afford to buy him out? Just some thoughts! I would say buy on your own if you can afford it and aren't particularly doing it to help him out.

edit: Also consider what might happen if you want to (for example) fit a new kitchen, he might not want to, then you are stuck with either an old kitchen or paying the whole amount for a new one. Likewise he could be stuck with paying for half a kitchen which you will be wearing out!

Gompo

Hi there,

Thanks for the replies, some infortmation that I wasnt aware of.

benjo wrote: »

But then if you are living in the house, you would expect to pay some rent, dunno how you sort that one out.

With regards to this, I will obviously have living costs and while the property is in a reasonable state it does need work before I could live in it, to which I will be paying for. While in my initial post it could have seemed I was desperate to keep all finance totally clear it's not the case. I am well aware that I am somewhat taking advantage of my brother's position etc.

g_attrill wrote: »

Various things that have being going through my head..!

He lives with his partner, in London, rent free - and earns 70% more than I. He couldnt afford to buy down there so this is an option for him to get in the property market. Initially he was going to have a smaller share for long-term investment. But after thinking it over I decided it wasnt much of an investment if he might not get anything back until I sold, which could have been in many a year. I suggested that we have a closer share (not necessarily 50/50) and that I'd have it in my head to be prepared to sell in 5 years time. Basically we'll have a look at the market and see what's what. I could just about afford to buy the house myself but I'd be quite stretched. It'd also make it difficult for any 'developments'. It does need a bit of work. The house is better (and a little more expensive) than the properties I'd been looking at for myself to buy and looks like a good investment.

I appreciate both your posts, but the main information I'd like is with the mortgage and what may happen.

At the moment I am thinking get the 50% Mortgage, with me paying 10% of it (or whatever I owe) over the shortest term possible.

Cheers.

Firewallrob

The previous posters have covered this already to a degree, but I can't stress this enough.

If (for instance) you open up an account to pay the mortgage and each put your 50% in. And ......one month your brother forgets to pay his half.

When you call the lender, they will not care in the slightest, as you are both liable to pay the mortgage. Even if you paid your 50%, the bank would still pursue you (and your brother) for the rest.

Things can change when people lose their jobs etc (a mortgage term is a long time), and if it's a choice between feeding their kids, and paying for a house they don't live in - you know what will happen.

If your brother is like mine, then you will NEVER have these problems - but you never know