FTB looking to step onto the ladder in unusual maner

pete96

Running_Horse wrote: »

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

Both my older brothers did it for their first mortgages and it was apparently the best thing they ever did...

My brother has now arranged an appointment with a Nationwide mortgage advisor for next Saturday. He also made contact with a solicitor to get that ball rolling.

Can anyone else offer any further advice relating to FTBs and first mortgages, current climate/housing market, fanancial aspects etc etc (and not relating to the social relationship with my own brother.... who i've known for over 24 years....)

Cheers

neas

sounds like your brother benefits more than you do.

I'd continue saving your deposit to get to around 10-15k point. Wife and I basically become hermits and save misters for 3-4 years to get our deposit now.

Now we have a good deposit, good mortgage rate and are due to exchange contracts on our first home to gether. if i'd have bought in 2007 like yourself i'd have lost my lower deposit and have around 5-10% equity.... but now i will buy a house and have 33% equity.

Atm house prices arent rising dramatically, so there no risk of house prices running off without you (aka miss le boat).... they may even drop more. I'd put your head down and concentrate on getting a house of your own..

If you buy this half with your brother here are the main issues:

1. Its like shared ownership, it could bring in problems if one of you needs money and other doesnt want to move/sell... (never mix money and family!)
2. This is seen as yourself as a stepping stone to your own house.. but i will give you some figures now for our house purchase. - Stamp Duty = 1% of house purchase (2k for a house you want), Solicitior fees =£800, Survery+application fees = £600. Basically if you are NOT a FTB it will cost you approximately 3.5k in costs. If you are a FTB (for 1.5 years in future) you wont pay stamp duty.
3. You will lose your stamp duty exemption when you buy her share i think. (which as i've pointed out is a 2k saving for your first home)
4. Once you own this property... and want to move out it will cost you a further 3-4k in solicitor/estate agent fees to actually sell it.
5. is there enough room for you his gf your gf and yourself? Wouldnt it feel a bit cramped? What if after 4-5 years paying off the mortgage you want a family?
6. Family point is good one, you are essentially putting yourself in an awkward position for when you might want a family.. might not be for a few years but you may be stuck with house share for a long time... and be unable to afford your family home.


So basically its going to cost you in the long run around 5k at least in extra cashola (stamp duty on 2nd 'your own house', 3-4k to sell your share of house)

When you should be concentrating on doing 1 less jump and staying there for longer.


I know what i'd do.... i'd say up enough for even a cheaper house but at least it was my own.

And to the point about your brother saying its the best thing he ever did.... is this the same brother whose trying to tie you into the most expensive loan you will ever take out?. Because i'd say it wasnt the best thing he ever did... if he has no choice to sell property cause his ex wants to sell.... and he enters a court battle that in the end forces him to sell and share equity....

mrs_deadline

OK then, current climate/housing market: I would question the whole fallacy of the housing ladder.
The 'housing ladder' of today is less than gravity-defying. Lenders know it, which is why they still want big deposits.

And then there's the problem that it's only half a ladder in your case, because someone else wants to keep their half...

There's a high risk that it won't be in your best interests, however good an opportunity it looks. You are the only one without the mortgage shackles for the time being, and you should play it cool. Never mind estimated values or even valuations, I strongly advise letting them find out the true market value. The only way is to put it on the market and wait for offers. It could take a few months or longer. There could be less equity than everyone thinks.

I think without going through that process, they are unlikely to realise just what a tight spot you are helping them out of. And you need plenty of time to research the legal side of the arrangement, which is not without its complications.

Food for thought I hope.

pete96

Finally, a negative but CONSTRUCTIVE post/peice of advice, thank you, neas. You sure have given me something to think about as opposed to the pointless digs previously.

I have a few question in bold below: (Apologies in advance if my responses come across in a negative way, i'm just trying to extract a greater understanding of all things to do with buying houses, to do that i need to ask questions right? )

neas wrote: »

sounds like your brother benefits more than you do.

I'd continue saving your deposit to get to around 10-15k point. I would need more like 20K surely? and by myself could take another 6 years, but then take into account inflation/houseprice I could probably add another year or 2 on that. I always thought I'd do well in life if i own a house before I was 30 Wife and I basically become hermits and save misters for 3-4 years to get our deposit now.

Now we have a good deposit, good mortgage rate and are due to exchange contracts on our first home to gether. if i'd have bought in 2007 like yourself i'd have lost my lower deposit How? and have around 5-10% equity.... but now i will buy a house and have 33% equity. How is this? do you have a 33% deposit?

Atm house prices arent rising dramatically, so there no risk of house prices running off without you (aka miss le boat) Probably will miss the boat if I have to wait 6 years, no?.... they may even drop more. I'd put your head down and concentrate on getting a house of your own..

If you buy this half with your brother here are the main issues:

1. Its like shared ownership, it could bring in problems if one of you needs money and other doesnt want to move/sell... (never mix money and family!) I dont see what the difference is whether it's my brother, girlfriend or wife? Please explain
2. This is seen as yourself as a stepping stone to your own house.. but i will give you some figures now for our house purchase. - Stamp Duty = 1% of house purchase (2k for a house you want), Solicitior fees =£800, Survery+application fees = £600. Basically if you are NOT a FTB it will cost you approximately 3.5k in costs. If you are a FTB (for 1.5 years in future) you wont pay stamp duty. I thought everyone pays stamp duty? But if you say FTBs are exempt but only for another 1.5 years, doesn't that make this point irrelavant if it's going to take 6 years before I can buy alone?
3. You will lose your stamp duty exemption when you buy her share i think. (which as i've pointed out is a 2k saving for your first home) Who do I contact to find this out?
4. Once you own this property... and want to move out it will cost you a further 3-4k in solicitor/estate agent fees to actually sell it. I know, moving home is way too expensive
5. is there enough room for you his gf your gf and yourself? Wouldnt it feel a bit cramped? It would just be my bro and myself. My GF may stay the odd weekend or soemthing. What if after 4-5 years paying off the mortgage you want a family? This was only ever going to be a 4-5year plan max anyway
6. Family point is good one, you are essentially putting yourself in an awkward position for when you might want a family.. might not be for a few years but you may be stuck with house share for a long time... and be unable to afford your family home. The plan was to get a 4-5 year fixed mortgage. My understanding is at the end of this term you have to re-mortgage anyway. Does this not open the door to sell up? How would I be stuck with the house after 4 years?


So basically its going to cost you in the long run around 5k at least in extra cashola (stamp duty on 2nd 'your own house', 3-4k to sell your share of house) Stamp duty surely irrelevant if it's only exempt for another 1.5years?

When you should be concentrating on doing 1 less jump and staying there for longer. Totally agree. It's just that im in this mind set of the quicker you can own a property the better off you are in later life, i.e. a payed of mortgage earlier


I know what i'd do.... i'd say up enough for even a cheaper house but at least it was my own.

And to the point about your brother saying its the best thing he ever did.... is this the same brother whose trying to tie you into the most expensive loan you will ever take out?. Both brothers have this opinion. Because i'd say it wasnt the best thing he ever did... if he has no choice to sell property cause his ex wants to sell.... and he enters a court battle that in the end forces him to sell and share equity.... not quite sure of the point your making here. To clarify, this is his second property. After buying with my other brother years ago, he and his GF then bought this house in question. Where has this 'court battle' come from? They are either going to do an equity transfer where by the ex gf gets her 50% of the equity, my bro gets his and then the two of us get a joint mortgage. OR, my bro and his gf sell together and go seperate ways.

Certainly all food for thought. Thank you very much for your input so far.

ET1976

pete96 wrote: »

.. it could bring in problems if one of you needs money and other doesnt want to move/sell... (never mix money and family!) I dont see what the difference is whether it's my brother, girlfriend or wife? Please explain

How would I be stuck with the house after 4 years?

Apart from one post, I don't see any 'pointless digs'. People are offering advice including comments on your relationship with your brother because there is huge potential for this to change if you own/live in a house together, particularly when it comes to going your separate ways.

The difference between shared ownership with a brother/other familiy member/friend and with a girlfriend/wife is that generally, couples have shared goals/ambitions/plans for the future and expect to compromise to stick together. So for example, your partner gets a job in another part of the country, it's far more likely you would relocate with her than you would if it was anyone else you were living with.

You could potentially be stuck with the house after 4 years if your brother doesn't want to sell and is unable to buy you out.

If you are looking to get yourself on the 'ladder' by doing this, you are surely relying on property prices going up (and thereby your equity going up), otherwise you may as well just keep saving rather than paying a high fixed rate on a mortgage. I think that's a bit of a gamble to be taking at the moment, especially over a 4-5 year period, but that's just my opinion.

If you were to do this you would need a watertight exit strategy (for when you come to sell or one of you leaves the property), properly drawn up by a solicitor. Otherwise there could be all sorts of difficulties a few years down the line.

neas

pete96 wrote: »

I'd continue saving your deposit to get to around 10-15k point. I would need more like 20K surely? and by myself could take another 6 years, but then take into account inflation/houseprice I could probably add another year or 2 on that. I always thought I'd do well in life if i own a house before I was 30 Wife and I basically become hermits and save misters for 3-4 years to get our deposit now.

House prices are going to stagnate/fall for probably the next 3-4 years... we are in big do do as a country (watchthe news... public spending cuts, public sector pay being frozen) and house prices have already reached a 'maximum' point. (Example being you even though with a 20k salary are strugglign to get a 2 bed First time buy after waiting a few years). Ofcourse this might not happen but if you can find someway to save just 5k a year you will have 16-20k depsoit in 3 years time. Ofcourse its key you increase rate of saving somehow (part time job, cashback websites i.e. switching gas/electric every 3 months)... you've got to be determined to make it. I had to do this for 3 years straight... i dont buy expensive tat, i buy cheapest stuff i can, i buy cheapest food i can, i save money every place i could... i shopped around etc... every pound counts and it worked.

Now we have a good deposit, good mortgage rate and are due to exchange contracts on our first home to gether. if i'd have bought in 2007 like yourself i'd have lost my lower deposit How? and have around 5-10% equity.... but now i will buy a house and have 33% equity. How is this? do you have a 33% deposit?

We managed to asve a 33% deposit. I found every damn way of saving money i could do. For exampl;e i use quidco/topcashback websites to get 80-125 pound for switching my gas and electricity every 2.5 months.... the net effect of this is my gas/elec is almost free. We use cashback on other things to, holidays we used via using tescos points scheme to acrue enough deals for a 'free' holiday (thereby saving the money i'd spent on holiday). I also took part in the 'coupon' use at tesco which meant i got free shopping every week and clothes and other things (this helped ALOT!).

Basically you have to try and save and make as much moeny as possible, its not easy you might have to cut back on friday/satueday night !!!!ups as 40-60 quid a night out once a week equates to about 2.5k extra deposit savings. which is 8k or so (once it gets interest) for a deposit.

3. You will lose your stamp duty exemption when you buy her share i think. (which as i've pointed out is a 2k saving for your first home) Who do I contact to find this out?

Stamp duty - http://www.guardian.co.uk/money/2010/mar/24/stampduty-firsttimebuyers

If you have ever owned a home (which i guess includes part owning) then you dont qualify. Which while not everything saved us £1650!

1. Its like shared ownership, it could bring in problems if one of you needs money and other doesnt want to move/sell... (never mix money and family!) I dont see what the difference is whether it's my brother, girlfriend or wife? Please explain

You and your brother will one day want to lead seperate lives... start families.... if you are both tied to a 2 bed house ONE of you will want the other ONE at one point to sell or transfer the equity as you are suggesting now. Problem is if nobody wants to take 1/2 a home (which people dont usually do unless related) or cant take it (cant get mortgage) then you would both have to fall out or one of you sell house when they dont.

Its same situation now.. your brother if you cant take over, most likely will not be able to afford both halves of house (mortgage) and would have to sell entire house and split profits (or losses) between him and ex.

Basically you have no control over your home because you only have 1/2 a share of it.. and if other person wants to leave/sell it gets nasty (either person who wants to leave has to keep it and stop them getting another home.. or person who dont want to sell is forced to sell and move etc). Its rubbish situation to be in... and as you are on good terms with brother now is a recipe for disaster. Im sorry but if you cant understand it now i do wonder if you've really thougth this through.

The plan was to get a 4-5 year fixed mortgage. My understanding is at the end of this term you have to re-mortgage anyway. Does this not open the door to sell up? How would I be stuck with the house after 4 years?

As you have currently demonstrated you are not good at 'overpaying mortgage' (because you havent saved much in the time).. so in the 4-5 years you will have paid off maybe 5k off the mortgage.... assuming house prices stayed the same.. you will lose this 5k from solictiors and estate agent fees when you sell. That is if you could sell it, if your brother wanted to sell and both agreed to sell.

Basically you helping your potentially helping your bro keep his house while not gaining alot yourself.. excep breaking even if you are lucky.

There is one flipside... if house prices somehow manage to rise 15-20% in the 5 years then yes then you'd have earned a share of this rise... which would give you some cash. Please take note however that the house you would want to ultimately get would also have rose by this amount meaning it moved further away.

I see where you coming from but if you doing this for a 5 year period.. entering the 'buy a house and it doubles in 5 years' market is over... which ironically is explained by your reason why you cant purchase a new home... i.e its rose so far it gets to a maximum level whereby nobody can buy/sell at the bottom so market locks up.

pete96

mrs_deadline wrote: »

OK then, current climate/housing market: I would question the whole fallacy of the housing ladder.
The 'housing ladder' of today is less than gravity-defying. Lenders know it, which is why they still want big deposits.

And then there's the problem that it's only half a ladder in your case, because someone else wants to keep their half...

There's a high risk that it won't be in your best interests, however good an opportunity it looks. You are the only one without the mortgage shackles for the time being, and you should play it cool. Never mind estimated values or even valuations, I strongly advise letting them find out the true market value. The only way is to put it on the market and wait for offers. It could take a few months or longer. There could be less equity than everyone thinks.

I think without going through that process, they are unlikely to realise just what a tight spot you are helping them out of. And you need plenty of time to research the legal side of the arrangement, which is not without its complications.

Food for thought I hope.

Definitely food for thought - thank you!

I cant remember if I mentioned it before, but my brother has debt in excess of 20K. It is serviced comfortably along with mortgge payments at present.

Would it be any different if I was to consider getting a joint mortgage with a best friend, both being FTBs?

Can anyone with a financial brain try working out and producing and example 4-5 year forcast of two scenarios A) Staying put renting with my OTHER brother and putting £300/month into an ISA and The route of part owning my OLDEST brother's house with him and wanting to sell after 4 years.

I think this would really help me get my head around things!

Thanks in advance!

Catblue

If your two older brothers felt that buying with each other was "the best thing they ever did" then why have they not previously rushed to help YOU buy?

2 years ago you were looking to buy and they did not offer to split a mortgage with you in order to help you out. They could also have offered up some cash to lend you for a deposit. They didn't.

Now one of the brothers is in trouble, and rather than bail himself out with the profits from "the best thing they ever did" he wants you to pony up the cash to help him out. Presumably your other brother had made a lot of money from the original mortgage and is in a better position to help your brother out than you are. Strange that other brother has not rushed in to have another bite of the "best thing we ever did" cherry.

If neither of your brothers can afford to advance any money to resolve this situation, then maybe they haven't made as much money as they are making out, or they realise the risks and do not want to take them.

Funny how the richer brothers who supposedly profited from the "best thing they ever did" first mortgage are now not in a position to offer any money at all. So the brother in trouble now turns to the poor third brother with this idea of "investment" which coincidentally bails himself out.

I'd be furious in your position.

I've just seen your "my brother has debt in excess of £20K" post. Run for the hills now.

pete96

i had my doubts, which is why i've come here

I guess when they say it was a good thing for them, they were both FTBs so did actually work out well for them, add to that they were in the peak of the 'boom'!

morg_monster

I remember that thread! I almost thought it was a windup or a thread for all the experienced posters to finely hone their bear arguments! It was great to see someone actually listen for once though :-)


Are you still at the same firm - the one primarily working on public sector projects? Is your job STILL safe now the Tories are in?!

ETA: I'm just reading through the other thread and came across a couple of posts by me... it's kind of cringing, like when you hear your voice on a tape and you think, god, is that what I really sound like?!