How to pay a family loan for a mortgage?

Gurdy11

Hi

My Husband and I have just sold our house after a year and had offer accepted on a new one. We were told by our mortgage co that we could transfer our mort over the the new house. However long story short, the mort product we took out to buy this house 4 years ago (self cert) no longer exists, so we have had to go right back to square one.

Problem we've had is, hubby is self employed and doesn't have the audidted accounts for 3 years. In terms of affordability we're better off now that we ever have been, our bills are due to be a LOT less in the new house too. I dont know what our credit score is like, 4 years ago it wasn't great, but we have been squeeky clean for last 2-3 years.

We have about 25% deposit to put down but we told that might be cutting it fine with our earnings etc. So, a family member has amazingly offered us enough to make it up to almost 50% deposit, which has given us more options.

What I'm not sure about yet is how best to use this money and pay her back. Do you think it would be best for her to use the money to buy a share of the house with us, and then we buy her out in a few years or do you have any other ideas?

Any advice would be useful

Vincenzo

Could/would they act as guarantor on your mortgage? This way they might be able to keep their capital albeit at risk of you defaulting on your mortgage.

I would also be careful how you tell your mortgage company about this loan as they might want to take it into account in their calculations on affordability.

Purchasing jointly would be an option with you buying them out later although this would cost more (solicitors fees & possibly SDLT) in the long run. You would also have the problem of whether you bought their share at the price they paid or the market value at the time?

G_M

A friend of mine did this years ago, borrowing 50% from her sister-in-law, and giving a 50% stake in the property.

Over the years the house price trebled (London in the good years). When she came to want to move, she couldn't as the agreement was that on selling the property sh'd repay the loan (which being 50% of the now much higher price meant she could never afford a new place.

Fortunately the relationship was still good, and they 'renegotiated' the terms of the loan so she repaid the original amount plus x%.

But the moral is, whilst it is important to set out when/how the loan will be repaid, be very careful how you agree to do this.