Buying a property from a family member at below market value

Chilly-1

Alias_Omega wrote: »

If you purchase the property, and she lives in the house, then you are becoming her landlord. Your auntie may live rent free, but you would still be eligible for the upkeep of the house & any associated checks (boiler checks etc). You will have to insure your investment too.

£23,000 income comes to about £1350-1400 a month take home, which your £70.000 mortgage (plus fee's) will be about £450 per month.

You of course wont be able to live in the house that you now own, so you will need to rent another house, or even purchase another house. Add this cost to the costs of the first house.

Then you have the "what if i meet someone, and have kids", then pretty much any remaining cash left is swallowed up.

At the minute it appears a good deal, but you need to ask yourself, what happens if -

a) Your aunt lives to 80-90 years old
b) Can you afford to repair the house if it breaks
c) Can you afford insurance + annual checks
d) Could you evict your auntie if you had to sell?

I forecast that things will go well, until the house gets too costly to run. The cash you pay on the mortgage will be needed elsewhere in your life..


If you were really really keen to do this, i would advise maybe to split the costs between 2 other people, and go £23,000 each on this, which probably could be funded from a un-secured bank loan. You will then be liable for a 1/3 of the costs to keep the house in good repair..

I can afford the £450 per month and to live in my current arrangements for the forseeable future.
My salary is expected to rise circa 3-5k in the coming year and as a 26 year old, I can only realistically see my salary rising.
My aunt has agreed to cover all the costs of maintaining, repairing and insuring the house.
I like the idea of an unsecured bank loan, nut finding partners for this venture would be difficult and i'd never get a £60-70k loan.

Chilly-1

RedTomato wrote: »

This is a minefield and if a professional company won't give her want she wants in terms of equity release, there's a reason for it.

Have you ever been through death/inheritance in a family before where there is a sizeable asset? So often people change, they really do, things can and often do get messy and nasty.

What are these other 23k of debts? Are they unsecured? Will she continue to be able to pay them? Do you know that finance companies are having some success in getting charges on properties despite loans initially being unsecured?

It sounds like your Aunt has a history of not being able to live within her means? You have no savings. It doesn't sound like you should be trying to go into complicated financial transactions.

I don't agree that you should take a 7k loan, loan interest is at a higher rate than mortgage interest at the moment. On your low salary with no savings you can't really afford to throw away this interest for a future promise.

She has been offered equity release but is unwilling to go ahead. the debts are credit cards and will be repaid in full from the proceeds of the purchase so she will be in effect debt free.
She has only not lived within her means for the past 5 years and selling the house to live rent free and release a bit of equity is a way of enabling her to enjoy the remainder of her life in the same manner. as i said, her health is not great.

Im not keen on a loan, I agree with your conclusion.
I have a couple of thousand pounds saving - but nothing worth mentioning for the purposes of a deposit. I am able to save and pay the mortgage and live elsewhere.

RedTomato

How much equity does she actually have in the house? What was the original mortage amount?

...and what's changed in the past 5 years? Lowered income due to illness? Or bankrolling husband?

Catblue

What about you? What do you want?

You say that it's okay for you to wait 20 years (and it could be more than that) for you to sell this house and then take on a mortgage for a house that you will then live in. So you'll be at least 46 years old by then? If the aunt lives another 30 years, then you'll be 56 years old and maybe find it difficult to get a mortgage.

The likelihood is that you will want to buy a house for yourself long before that. What if you and your partner have babies? You'll have big childcare costs or a drop in income for one of you.

What if you and your partner split up? Can you afford rent for yourself AND £450 per month for the aunt's house?

It is not like you have a lot of money to finance this. Sorry, but it isn't. You are just gambling on having more money in the future.

You say you can afford to pay £450 per month, but you certainly haven't been saving £450 per month every month if you only have £2K in savings behind you.

In short, it sounds like you are only just getting by as it is at the moment. Taking on a £60K debt and having to find £450 per month sounds very risky.

poppysarah

Chilly-1 wrote: »

I can afford the £450 per month and to live in my current arrangements for the forseeable future.
My salary is expected to rise circa 3-5k in the coming year and as a 26 year old, I can only realistically see my salary rising.
My aunt has agreed to cover all the costs of maintaining, repairing and insuring the house.
I like the idea of an unsecured bank loan, nut finding partners for this venture would be difficult and i'd never get a £60-70k loan.

I think you're very naive to think that things will go how you think.

If you own it then you must insure it for the mortgage - you must maintain it if she's your tenant and you must comply with gas safety checks.

It might be fine for a year - and then something might happen and your aunt decides she's not paying. Perhaps one of her kids gets annoyed if prices go up madly and see you've got a bargain and have "robbed your aunt".


AND you are unlikely to be able to get a mortgage for a home of your own should you want to.

dopester

Chilly-1 wrote: »

It is odd, but her children cannot help. Her husband has not paid anything toward the mortgage and is not named on the property (their future together is also very uncertain), she also has other debts (£23k) and would like additional capital to enjoy the rest of her life - this is absolutely key for her.

Even if her husband is not listed on the mortgage or the deeds, in any divorce, wouldn't he be able to put in a claim on the house?

poppysarah

dopester wrote: »

Even if her husband is not listed on the mortgage or the deeds, in any divorce, wouldn't he be able to put in a claim on the house?

If he's contributed towards bills etc I'm sure yes.

JimmyTheWig

Chilly-1 wrote: »

finding partners for this venture would be difficult

Does this not tell you more about the venture than even all the comments on here?

Chilly-1

poppysarah wrote: »

I think you're very naive to think that things will go how you think.

If you own it then you must insure it for the mortgage - you must maintain it if she's your tenant and you must comply with gas safety checks.

It might be fine for a year - and then something might happen and your aunt decides she's not paying. Perhaps one of her kids gets annoyed if prices go up madly and see you've got a bargain and have "robbed your aunt".


AND you are unlikely to be able to get a mortgage for a home of your own should you want to.

I dont think I am being naive. I am an operations manager with Facilities management experience so I'm fully aware of the insuring & maintaining obligations, and I'm fully confident that these minor issues will not be a problem as we can make arrangements such as a reserve fund etc. Im not interested in getting another mortgage for myself as I see this as my mortgage. and once the house is sold, I will put the capital into my own property - probably at a time when mortgages and properties are more freely available again.

The kids & family will be given initial 'gifts' and subsequent 'gift' from me once the property is sold, so they will receive as much as they would have if my aunt had used an equity release scheme.

And what if she were not my tenant... what if we cohabitated?

I must stress that she has bankrolled the husband, will continue to work and bring in money for inheritance and upkeep of the property.

I dont quite get the hostility from some posters.

Person_one

I don't think there's any hostility towards you personally, but you asked for opinions on possible issues with the idea, and there are many.

I personally wouldn't touch this with a bargepole, and I think you'd be crazy to do it, but it seems you've pretty much made up your mind.