House owner with mortgage want to help brother and buy house with him

charleybell

Hi

This is my first post please be kind.

I currently own a home with my husband which is jointly mortgaged through Natwest/RBS (was First Active). My brother is not in a position to purchase a property on his own and I would like to buy one with him and be a joint mortgage holder with him.

Together we can raise around 10% equity maybe more if we need it. I dont want to bear any risk on my current home and want this mortgage kept completely separate.

I really wanted some advice as to how feasible this is, my current salary is £38k and my brother is self employed with £10k net profit last year. The property we are looking at would need around £70k mortgage. My outgoings are around £1000 per month.

Any advice would be appreciated.

Thanks

Charleybell

holly_hobby

This may be possible, but there are a number of issues to consider.

Borrowing on 2nd property

>The lender will need to ensure that your salary is sufficient to service both your own mortgage commitment (held with your hubby), and the 2nd mge held with your brother.

>Your brothers income will be included with yours in determinng affordability, if he has account/or self assesment records to substantiate his 10k net profit.

Legals

>Assuming you fit a lenders criteria, buy buying jointly with your brother, you will be both jointly and severlly liable for the entire mortgage debt and repayments. (meaning that if your brother doesn't maintain payments it will be your responsibility to do so)

>Further to which, as joint owners you will both be entitled to 50% of any equity released on disposal of the property.

>And upon death, the ownership of the property will whollly revert to the surviving mortgagor. (borrower), as (a joint mortgage) you are unable to "bequeath" your share as part of your will or write it under trust.

>As the property will not be your main residence, upon disposal (its sale), you will also be liable to capital gains tax on your share of the equity. (net of any allowances)

>If you wish your share on your death, to revert to your estate for your own family benefit, then you shall need to effect the mortgage as Tenants in Common. Whereby you can split the % of property however you choose, and you will be able to include your % share in your will, or place under trust.

>You also need to think about how this arrangement will effect both of you , should either one of you wish to be released from the mortgage liability i.e if your brothers income is insufficient to service the loan on his own, the lender can refuse to release you from the mortgage liability.

Arrangemens like this, appear great on the surface, but can hold and cause a whole host of problems later in the day - unless both parties understand the terms of the commitment they are entering into, and ensure they have taken adequate legal advice and any suitable precautions.

If you want to sound out the affordability and costs aspect, take a appointment with a whole of market adviser (try for a fee free adviser), present to them your requirements and proof of income - whereby they will source any suitable lender and mge products available.

Hope this helps

Holly