Mortgage via a third party

MrMaxP

Hi all, I have a mortgage puzzle.

I'm having trouble getting a mortgage as a newly self employed person. I've had an Idea though that could help me get a house and ride out the first 2 years until I'm financially viable again in the eyes of a mortgage lender.

The idea is this. My brother, who is mortgage free and on a good income buys a house for me. I however pay the mortgage directly and after 2 years I get my own mortgage and he signs the house over to me.

Now, I can see several problems here, none of which I know the answers to.

1) If he signs the house over, despite me having paid the mortgage is he effectively giving me a house and will there be a tax implication.

Or

2) When applying for my mortgage would I be effectively buying the house off him, and if so would there be a problem as the house price may have gone up and he's selling below market value?

And

3) As I am technically paying his mortgage would he incur tax as it is an income to him.


Anyone got any ideas on this?


Thanks,

Conrad

Maybe consider buying it in joint names - as couple do where one has no income. Later seek to remove his name. Many people do this.

mic200202

Some lenders will work on 1 years accounts and a projection.You could wait and try.

With self employed you will need to have a healthy net profit before tax figure to use as income.Is this realistic?

You cant pay the mortgage directly as the payments will be in your brother's name from his own bank a/c.You can however,pay him an agreed rental amount equal to the mortgage payments.Technically,this is income for him,but as he has the mortgage to pay he should be able to offset one against the other to avoid any tax.You would need to buy the house from him later.

You can buy the house from him as a concessionary or family gifted discount without too many problems.

The risks to you both are: Will you be able to get a mortgage in 2 years time? What if the property value goes down? He may end up with a mortgage on a property that he is not making anything from.

Thrugelmir

mic200202 wrote: »

You can buy the house from him as a concessionary or family gifted discount without too many problems.

For tax purposes the property has a market value which is not the same as the cash consideration paid. As selling at under value could amount to tax evasion, in this case potentially CGT.