re,-shared mortgage advice

thewinkshow

i posted another thread were my dad was going to come on a mortgage with me and 2 friends but not live with us.anyway

found out dad cant be on more than one personal mortgage by law.so he is remortgageing his own house to free up 40k,he will give us this for our deposit.

we are looking at a 160k house,so put 40k down and be looking at a 120k mortgage between 3 of us,im told they will be a bit more leanient with our incomes as we are putting down so much and we will get a better interest rate.works out roughly at £600 a month this will be £200 each,i cant see them turning us down as i can easily afford this.the house we are looking at is new and come fully furnished with everything inside.

what do u think?

Xbigman

What will your dad have in writing to protect his 40k?

If he is giving you the 40k and you sell what is in place to stop your friends simply gaining 13k each from your dad in equity?
Regards




X

rjm2k1

You need advice from a solicitor re protecting your dads and everyone elses interests. You would need to be Tenants in common, with each person owning a specific amount of the property, probably 1/3 each. Your dads money needs to be protected, there are ways of doing this, he could have a written agreement and a charge on the property, there may be other ways, a solicitor would be able to advise and set this up. You also need to get down in writing the procedure to be used if one of you wants to sell up or move someone else in, eg take the average valuation from 3 local estate agents (though estate agents and any other valuation often isn't worth the paper it's written on).

icklejulez

my parents in law have invested in my current property and will also be investing in the one I am currently buying. We have worked it out at them owning a 20% share in the house rather than a fixed figure. They are in the housing trade and dont believe house prices are likely too fall too much and they've just made 15k(35%profit) over 3years on our current propery. Better than any savings account. They did however pay a solicitor to draw up contracts.

Conrad

rjm2k1 wrote:

Your dads money needs to be protected, there are ways of doing this, he could have a written agreement and a charge on the property, .

Lenders wont like this as thier asset is at risk. In the event of a repossesion they require enough equity to not only repay the mortgage plus arrears interest but also to make the property fit for selling (some repossesed people strip the house), baliffs costs, legal fees, court costs, changing locks etc etc.

For a third party to 'own' all the equity by way of a charge not only exposes the lender to greater losses, but also is deemed as more risky as the owners are'nt putting thier own hard earned cash into the deal.

As I said on the other thread this is a compex case and needs care but can be done.

thewinkshow

how is their asset at risk anymore than a couple buying a house,i thought if anything they would be pleased that we are putting down 40k deposit.isnt it the same with every repossesion that they need enough money to pay off the mortgage and make it fit to sell again?surely this doesnt just apply to me,in a normal scenario they would have to reposses the house to pay for everything,if this happens to us,then they lenders will do the same to us,but will have 40k already invested this is like putting 25% down,i think this is far more than most first time buyers put down,so wouldnt they be on a winner?would they not feel their risk as regards paying off the mortgage and making it fit for sale as far less?im sure they must see us putting so much down as a less risk in the event of repossesion as apposed to a couple who want a 100% mortgage and put in none or a very little mortgage.

i know very little about all this,im just going off what seems like common sense to me

does it not work like this?i know very little about all this.
thanks

rjm2k1

Not sure exactly how it works, but if a lender reposesses a property, they are under an obligation to get the "best price", however that may be under market value. If you buy a house which costs 100k and put a 30k deposit down and the lender re-posesses and sells at say 80% below market value, they get their 70k back, but that only leaves 10k, so what's happened to your dads 30k deposit? That's probably a worse case scenario, but it's even more complicated than that since your dad would possibly effectivly be putting down a deposit split between the three of you, unless your share took account of his deposit. Again, you can't confuse you buying a house with friends and buying a house as a couple, though couples can break up and have to deal with things (which is no bed of roses if it happens), they don't go into such a purchase knowing that in a couple of years they will want to go their own way or move their other half in or buy a flash car and stop paying their share of the bills because they know the others will have to make it up. I have to assume that joint owners in mates mortgages are jointly and severaly liable for the mortgage (how can the lender reposess 1/3 of a property?) which will always encourage some people to take the p"ss and let their mates cover for them. If you must go into this, why not get your mates parents to cough up 10k each as deposit which can be matched by your dad and then go 3rds onthe mortgage between you with a very tightly written contract about the ins and outs of sharing.

I'd still recommend renting a shared place before even considering buying something together.