FTB looking to step onto the ladder in unusual maner

pete96

Hi there,

Some of you may remember me when I posted another FTB thread in Sept 2008, for reference the thread is here:
https://forums.moneysavingexpert.com/discussion/1148651

In short, I was looking at buying a new build 2bed house with my girlfriend for around £190K and with not much more than £1K deposite. Thought we could just about aford it untill all you sensible people did/said everything you could to prevent us comitting financial suicide - thankfully, you lot won and I took your advice!

Well since then, I've manage to retain my job as an Architectural Technologist, im now putting £300/month into my ISA and have about £4.5K in it. My brother owns a 2 bed house (worth about £180K) with his ex-girlfriend (they split up in the last month) and now his ex is looking at options to sell her share on the house. The idea came to us that it could provide an oppertunity for me to get onto the property ladder and effectively buy her share of the house.

I was hopeing that, in much the same way as in my original thread above, that some of your sensible people could kindly offer some advice on my situation and options to buy into the house. Basically, is this a great idea or financial suicide? What is the best type of mortgage? Can I aford all the extra costs that come with owning a house unknown to a FTB? The only problem I see at the moment is that his ex wants everything done and sorted ASAP so I either pull out on the basis of not wanting to rush into it, or I just jump onboard and hope for the best. Either way it will be impossible for me to thoroughly read into the idea and be 100% confortable with it - I dont even really know where to start!

The ex-girlfriends parents looked into the situation for them and spoke to Nationwide (their mortgage providers) who suggested the best option to take the idea forward would be to do whats called an 'Equity Transfer'. They have got hold of the 12page application form for it and I'm planning to go over to see my brother and his ex tonight to look through the paper work.

I have to admit that tonight will be the first time I will have seriously looked into it with intent. This thread also marks the start of any real research into this idea, and house buying in general, carried out by myself since I was last looking to buy in 2008.:embarasse Therefore please forgive any naiveties on my part, feel free to heckle me to get off my ar5e and trawl through lots of old threads. Please also feel free to ask for any additional info you require in order to offer any advice.

As always, any help/advice much appreciated!

Pete

kmmr

My first piece of advice would be don't feel too rushed. This is a big decision for you, and it's not like she will have 100 people lining up to buy half a house with your brother.

Second piece would be to enter this with a healthy scepticism as to what can happen in the future. Your brother or you may change situation in the next 5-10 years that you own the house, so you should have an honest discussion about what would happen if one wants to sell, or to buy out the other, or one is suddenly unable (unwilling) to pay their way. Or other scenarios that you can think of. I did this with my brother, and after 4 years of fighting over it (and I am the evil one stealing a house from his children) we have finally cleared things up and are starting to heal some serious family rifts.

One scenario you should strongly consider is them getting back together. After only 1 month you never know what will happen.

Fang_3

Will this not just prolong the problem? You'll want to buy a house with your girlfriend, but you'll own one with your brother? What happens when you or he wants out? What happens if property prices fall further and you're stuck owning a house with your brother in negative equity? Would you live there with your girlfriend? Might your brother feel like it's his house and feel put out living with a couple? Personally, I wouldn't do it.

kmmr

Hi Pete,

Right - I have read through your whole other thread and have more respect for you as you will listen! Can I ask for some extra facts?

Where are you getting the valuation from? What recent sales are you comparing it to?
What equity does your brother have in there already.
What equity does the ex have in the place.
Will you split the mortgage costs 50/50 in the future.
Are you on a repayment mortgage.
Are you still with the girlfriend. What is her involvement in this.
Will you live in the house, or will this be an investment property for you.
Are you going onto the 2.5% Nationwide SVR. If so, are you sure the change in details of the property doesn't move you to another rate. I know that Nationwide will do anything to get people off that rate if they can.
Is your income still the same? (£20K + £12k g/f)

You should get some independent advice on how to draft a ... hmm.. I can't remember the name, but a notice that details how things would be split in case of sale.

pete96

Kmmr, thanks for your input and experience, duely noted!

Fang wrote: »

Will this not just prolong the problem? You'll want to buy a house with your girlfriend, but you'll own one with your brother? What happens when you or he wants out? What happens if property prices fall further and you're stuck owning a house with your brother in negative equity? Would you live there with your girlfriend? Might your brother feel like it's his house and feel put out living with a couple? Personally, I wouldn't do it.

These are exactly the sort of question I was looking to get answers for. I have no idea what will happen if he or I want out, i've never had to sell a house before and no idea what options we would have in that scenario. However, I have faith that the arrangment will work on a social level, I like to think we all have good sibling relationships. Im the youngest, this brother is 10 years older and the oldest of 3, then there is the middle bro 7 years my elder. I have been renting with the middle brother over 5 years now without a problem, and both my brothers bought their first house together and lived together for maybe 5 years before the middle one bought his flat (the one I currently live in) and the older one bought the house in question with his girlfriend. I might also add that the girlfriend lived with both of them for the latter years living there, which was probably the reason they eventually went seperate ways.

My girldfriend is a sticky subject at the moment - we've had a bit of a dip this year and are not as close as when we looked at buying in 2008, plus her circumstances and career ambitions have changed alot since then and I don't see her being in a position to buy anything for at least a year or 2 anyway. The option of her lodging with us in the future may be an option and something which I will raise tonight.

I can appreciate that it may create one or two social issues a year or few down the line, particularly regarding my girlfriend, but the way I see it is that this is a golden oppertunity for a FTB to get onto the property ladder which is forever becoming increasingly difficult for FTBs to do so.

pete96

Thanks again kmmr, unfortunately i'm unable to answer most of your questions right now - I should be able to post the answers to most of them tonight after speaking with my bro and his GF. I have answered what I can below:

kmmr wrote: »

Hi Pete,

Right - I have read through your whole other thread and have more respect for you as you will listen! Can I ask for some extra facts?

Where are you getting the valuation from? What recent sales are you comparing it to?
What equity does your brother have in there already.
What equity does the ex have in the place.
Will you split the mortgage costs 50/50 in the future.
Are you on a repayment mortgage.
Are you still with the girlfriend. Just about, we recently split but are beginning the re-build. What is her involvement in this. I didnt see her being involved financially. It could be possible she may lodge with us sometime down the line. She wont be in any position to buy anything for at least a year or 2.
Will you live in the house, or will this be an investment property for you. Yes this will be for me and my bro to live in.
Are you going onto the 2.5% Nationwide SVR. If so, are you sure the change in details of the property doesn't move you to another rate. I know that Nationwide will do anything to get people off that rate if they can.
Is your income still the same? (£20K + £12k g/f) I am now currently on £24.5K and savings of nearly £4.5K. Still have two years on my car loan paying £150/m

You should get some independent advice on how to draft a ... hmm.. I can't remember the name, but a notice that details how things would be split in case of sale. I will mention this tonight

pete96

Hi, kmmr, I can answer the rest of your questions now...

kmmr wrote: »

Hi Pete,

Right - I have read through your whole other thread and have more respect for you as you will listen! Can I ask for some extra facts?

Where are you getting the valuation from? They will be using their mortgage provider (Nationwide) to organise a valuation. What recent sales are you comparing it to? Not quite sure what it is your asking here exactly?
What equity does your brother have in there already. 50% @ approx £35K (Based on the fact that there is around £120K mortgage left and estimated value of about £190K)
What equity does the ex have in the place. As above
Will you split the mortgage costs 50/50 in the future. Yes that was the plan. However, I think he will be putting up the majority of the deposite as I only have £4.5K savings, he will put up around £20K. I assume this will therefore need looking at regarding who gets what at the end when we go our seperate ways... a mortgage advisor should help us with this?
Are you on a repayment mortgage. My bro & his ex are on a repayment mortgage (this is opposed to an interest only mortgage right?). We will be looking to do the same again.
Are you still with the girlfriend. What is her involvement in this.
Will you live in the house, or will this be an investment property for you.
Are you going onto the 2.5% Nationwide SVR. If so, are you sure the change in details of the property doesn't move you to another rate. I know that Nationwide will do anything to get people off that rate if they can. They are currently on their fixed mortgage, again I think we will be looking to do the same again.
Is your income still the same? (£20K + £12k g/f)

You should get some independent advice on how to draft a ... hmm.. I can't remember the name, but a notice that details how things would be split in case of sale.

I hope I have given you all the info you were after.

Thanks for the help!:money:

dopester

What if your brother gets a new girlfriend and wants her to live in the house?

Is there enough room for her, and for your girlfriend as a lodger too?

Does such a situation not have the potential to cause problems with two relationships in one home? Might anyone involved in living there, and their slobbish/tidy ways conflict with your own? I've just cleaned this kitchen floor dammit. Utility bills... electricity is through the roof and I've been out working all day whilst you slob infront of the TV with the electric heater on.. and you want me to pay half of it?

Also the other points listed above, like what if your brother loses his job or wants to sell up? If you're stretched to buy half-the-home, could you foresee yourself being in a position to buy the other half at an event that could possibly happen in the short term? Plus overpaying.. are you going to be willing to offer a market competitive price for the half-share being offered to you, or is brother wanting you to pay over the odds for it?

pete96

My responses in bold...

dopester wrote: »

What if your brother gets a new girlfriend and wants her to live in the house? If either of us needs/want out then we either both sell or one of us buys the other out??? I assume thats how it works... :huh:. But hey, we're brother's, neither of us will stitch the other up or put the other in a financially impossible situation for the sake of a girlfriend

Is there enough room for her, and for your girlfriend as a lodger too?

Does such a situation not have the potential to cause problems with two relationships in one home? Might anyone involved in living there, and their slobbish/tidy ways conflict with your own? I've just cleaned this kitchen floor dammit. Utility bills... electricity is through the roof and I've been out working all day whilst you slob infront of the TV with the electric heater on.. and you want me to pay half of it? Ok, well it's either this, or I can wait 10-15 years to build up a £20-30K deposit to buy a house of my own. Or If saved hard I could maybe just about aford a pokey high rise bed sit in somewhere like Peckham in a year or two. :laugh: I'm fully expecting the odd disagreement, it's part and parcel of living with anyone. I don't think this comes anywhere near to outweighing the benifits of the oppertunity IMO.

Also the other points listed above, like what if your brother loses his job or wants to sell up? If you're stretched to buy half-the-home, could you foresee yourself being in a position to buy the other half at an event that could possibly happen in the short term? Plus overpaying.. are you going to be willing to offer a market competitive price for the half-share being offered to you, or is brother wanting you to pay over the odds for it?

Running_Horse

I have known several people buy houses together, and never once known it end happily.

SouthCoast

Running_Horse wrote: »

I have known several people buy houses together, and never once known it end happily.

Pessimist.:)

Buying property is the easy way to mega riches.
Nothing will ever go wrong.;)