How to help my brother onto the property ladder?

smartpicture

My brother is looking to buy his first house with his girlfriend, and I'd like to help them out while investing some money I just have sitting in the bank right now. What's the best, safest, fairest way to do this to protect both of us?

They have some money saved for a deposit and buying costs, and have been offered a mortgage paying around the same as they currently pay in rent. I was thinking of maybe buying one third of the house so they can afford somewhere decent. What things do we need to think about / worry about / put into an agreement? Especially if they break up, as he / I will be putting in the majority of the money and I'd want to be sure the proportions we got out of it would be fair.

Fire_Fox

You will need the agreement of the lender - they may well not be happy to have three of you on the deeds and two on the mortgage, nor a second charge on the property. If you have that already you should consult a solicitor on purchasing as tenants in common OR drawing up a deed of trust.

If you assist your brother and his partner to buy a house that is beyond their means, remember that the bills will be higher - heating, council tax, maintenance. If they are not already experienced in running their own household they would be better off starting out small.

Wickedkitten

As much as i love all of my siblings, family and money do not mix. Most solicitors should be able to draw up an agreement but what are you going to do splitwise if they get married?

CloudCuckooLand

Agree with WickedKitten, family and money don't mix well. This is a minefield, waiting to blow up in your face.

What if you want to buy your own place in a year or two, will they suddenly be expected to remortgage - which presumably their incomes will not support, otherwise they wouldn't need the help in the first place.

Plus the old chestnet, as you are doing this for investment purposes, you risk a repeat of the 90s, when it took 6 years to hit bottom on house prices - we could be only a third of the way through the process!

PasturesNew

There are 101 things that could go wrong. What if she gets pregnant, has twins, they split up, the house is worth less, she kicks him out of the house and moves in her drug-dealing new bf and stops paying the mortgage?

smartpicture

PasturesNew wrote: »

There are 101 things that could go wrong. What if she gets pregnant, has twins, they split up, the house is worth less, she kicks him out of the house and moves in her drug-dealing new bf and stops paying the mortgage?

I already own my own mortgage-free house, and I have this money sitting in a bank account, so if I want to help my brother and invest my money in the housing market at the same time, why not? I realise house prices can go down as well as up.

What I'm looking for is advice to protect both me and my brother as much as possible, so that there is no misunderstanding later and we've all thought of what could happen and how we will resolve it as far as possible. Such as what happens if they split up, and whether she could end up walking away with more than her fair share.

So, what kind of scenarios do we need to think about and agree on in advance (the above being one!)? And how should we structure the financial arrangement so it's fair to everyone?

Fire_Fox

You need to get the permission of your brother's lender before you go any further.

poppysarah

The safest way is to not get involved.

Seriously this could get nasty and complicated and leave you wishing you hadn't.

mlz1413

How much are you thinking of lending them, do you want monthly interest payments of your investment, are you prepared to make a loss if house needs to be sold quickly?

If your brothers g/f is in agreement maybe you and brother could buy the house and get the mortgage and then draw up an agreement with a solicitors for future events like selling the place, who pays for repair large & small, how mortgage is repaid if house value goes down.

I would only do this as a short term help line, allowing them time to learn how to run a home and live together but do not allow it to run into them having children or getting married as then they need to be independant for these commitments.

Ensure you get your agreement in writing with all 3 involved signing the agreement and approved / lodged with a solicitor.

firesidemaid

i must admit, i too was thinking 'don't do it'.

but, if you really want to, you have to expect that at the worst (like any investment with risk), you could lose all your money.

also, consider, if you are putting in a 1/3rd deposit etc, if you are not paying 1/3rd of the running costs/bills/mortgage etc then you are not entitled to an equivalent uplift on your money. you will have to draw up how any profit/loss will be split between you all.

also, will you be paying a share of the buying and any future selling costs?

will you be paying a proportion of the buildings insurance etc? how safe is your brother's and your girlfriend's jobs? could your brother afford the mortgage etc alone if necessary? could you?

why not give them some money as a gift instead?

ET1976

As you use the word 'invest', it sounds as though you are wanting to make something on the deal (or at least get your initial capital back), rather than just loaning your brother the money indefinitely. So you need an exit strategy - how and when are you going to get your money out? Do you anticipate your brother being able to buy you out at some stage?

Even if nothing goes 'wrong' and you're all still the best of friends, it's going to be hard to get your money back for a long time, given the proportion you're thinking of investing. I think you need to work this out first.