shared ownership on a mortgage advice please

thewinkshow

hi there,just looking for a little advice.

im looking at getting a mortgage with 2 of my friends,all aged between 22 and 24.we all earn roughly 15k each per year.


my dad has offered to come on the mortgage with us,but obviously wont be living with us,so it will still be just us 3 in the house,but with the mortgage being split 4 ways it should make our repayments easier.my dads doing this for 2 reasons,1.to help us out2.to make money when we sell up,he gets his share.us 3 have not got much in the way of debts.

he has his own business and earned 50k last year that he declares,he brought home more than this,he has 100k left to pay on the house he is living in,i am aswell,still living with the parents,our house is worth roughly 250k,he also has nearly payed the mortgage on his work building that he owns,this is worth about 300k,he also has a house that is worth 120k that he rents out to people.

with him having the highest wage would he be the first wage on a mortgage application?how much can we lend,and have anyone got any other relevant infomation reagarding our idea?

thanks in advance

rjm2k1

Do some research on shared ownership first, there are many pitfalls, what happens when one of your mates gets a gf he wants to move in with him, what happens when one of you wants to leave, what happens if one of you defaults on the mortgage, what happens if one of you gets a bad credit rating (I believe that the rest of you and your dad could be affected by this), what happens if you fall out etc etc.

thewinkshow

isnt it the same as when a couple fall out?either the one left in the house pay the bills or the house gets sold.

rjm2k1

It is similar, but a couple are planning on staying together in the first place, no doubt you and your friends don't plan to spend the rest of your lives together? Also a couple are more likely to be honest and thoughtful about joint finances than friends. Have you shared accommodation with anyone before, it can turn friends into enemies quickly. Not saying you shouldn't do it, but you need to think of all the potential issues and how to deal with them.

filigree_2

I experienced all the problems rjm mentions and it was a total nightmare. I was completely stuffed, expected to pay 1/3 of all the bills while flatmates moved in their partners and other hangers on dossed on the sofa stealing my food out of the cupboards.

If your venture turns out to be a disaster it won't be that easy to sell, if the other owners are reluctant then they can make it very difficult indeed to sell the property and in the meantime the debts mount up. Even if you do sell it can cost thousands in EA commission etc. If the market crashes you could find yourselves in negative equity and find it even harder to sell up. You should understand that it won't be easy to walk away if problems arise.

How about this: Your Dad seems quite secure financially. He could buy a property by himself on a BTL basis, and rent it to you and your friends. Try living together for at least a year before committing to something as serious as shared ownership. If it turns out that you all hate living together then your Dad can just run the property as a business proposition. If you still think you can make a go of it, then remortgage as sharers.

I know too many people who got burned by trying to buy property with sharers. Please give lots of thought to what you are doing because there are so many pitfalls.

rjm2k1

filigree wrote:

How about this: Your Dad seems quite secure financially. He could buy a property by himself on a BTL basis, and rent it to you and your friends.

May struggle to find a BTL mortgage which allows family to rent the property, most exclude it, but still, if they don't know...

bloaty

If someone bought a house and let their son or daughter live in it rent free, just paying the council tax, water and bills, I assume there would be no tax to pay as no income coming in.

Is thiat correct or naive?

rjm2k1

Probably correct, though there may be CGT to pay when the place is sold, depending on how well you prepared for it in advance.

anniecave

rjm2k1 wrote:

May struggle to find a BTL mortgage which allows family to rent the property, most exclude it, but still, if they don't know...

but I know several people who've bought flats or houses for their son or daughter and their respective friends to live in as a buy to let investment. How did they manage it then?

rjm2k1

Maybe their lender doesn't mind, or doesn't know, why not ask them and let us know?

Conrad

thewinkshow wrote:

hi there,just looking for a little advice.

im looking at getting a mortgage with 2 of my friends,all aged between 22 and 24.we all earn roughly 15k each per year.


my dad has offered to come on the mortgage with us,but obviously wont be living with us,so it will still be just us 3 in the house,but with the mortgage being split 4 ways it should make our repayments easier.my dads doing this for 2 reasons,1.to help us out2.to make money when we sell up,he gets his share.us 3 have not got much in the way of debts.

he has his own business and earned 50k last year that he declares,he brought home more than this,he has 100k left to pay on the house he is living in,i am aswell,still living with the parents,our house is worth roughly 250k,he also has nearly payed the mortgage on his work building that he owns,this is worth about 300k,he also has a house that is worth 120k that he rents out to people.

with him having the highest wage would he be the first wage on a mortgage application?how much can we lend,and have anyone got any other relevant infomation reagarding our idea?

thanks in advance

This is an incredibly complex and dangerous endeavour.
Note many lenders wont apply all the income to the multipliers. EXAMPLE: Instead of 3 x joint, they might do 3x joint, plus 1 of 1 freinds plus 1 of Dads.

Most lenders wont allow Dad on the mortgage as he wont reside. There are many reasons for this.