House-buying idea - maybe new, maybe not...

googler

If I'm one of those who 'gives' you £2000 (or more), what guarantee do I have of getting any of my money back?

What legal agreement would need to be in place? Who would draft it, and how much would they want to be paid?

Idiophreak

twirlypinky wrote: »

I'm going to humour your crazy idea.

It wouldn't work because a bank won't lend you money for a mortgage without a deposit.

Buy the house with the money you've borrowed from your very generous friends and family (you owe 100% of house)

Get a loan from a bank for "home improvements", they'll lend to you because you've got no debts (you owe 110% of house)

Use the cash from the loan as a deposit so you can get a mortgage on the balance and pay everyone back. You'll end up with a loan and a mortgage and be very stupid.

That's a kinda round-the-houses way of committing fraud. If you're up for that, why not
1) Get a loan for a holiday/car/"home improvements"/whatever
2) Use this as a deposit for a mortgage.

Just as dodgy and not recommended, but a quicker way of achieving the same thing.

OP, as everyone's pointed out, the flaw in your plan is that you still can't get a 100%LTV mortgage, even if you own the place. You'd still need to leave a chunk of cash tied up in the property.

rubsley

Hi all, many thanks for pointing out the flaws. Even though I kind of suspected it was a massively impractical idea it's still nice to be proven wrong. Seems like floating it out to smarter people - and then watching it fall apart - is one of the best ways to stop these ideas of mine in their tracks.

Cheers for the wisdom! :-)

rubsley

PS Would you smarties be able to help me out with something else? Thing is, the local council round here seem intent on building new homes and everyone's always talking about it with big grins and saying how we "desperately need new houses" and things like that. But what I don't understand is, how can that be true given that there are dozens and dozens and dozens of houses currently on the market, and that these houses aren't generating any interest? I mean, I've a friend who's trying to sell her place for about 10% less than she paid for it in 2007 and she's had one viewing in 12 months. There are plenty more like her around town. And it's not even that the ones currently on the market aren't decent houses, or "affordable" - which is the other buzz word the council like to use - just that nobody's interested.

So my question is, wouldn't the building of new houses just make it even more difficult for people with homes on the market to sell? And isn't it therefore bad for the people that are already living here?

Linus2864

Hi Rubsley,

Regarding the building of new houses, perhaps they are more affordable than existing homes as potential buyers may get a discounted price from the builders or may be eligible for FTB help? Also a lot of people are attracted to new properties as they will be covered by a new build guarantee, and are less likely to have flaws resulting from wear and tear.

As for your friend's house, as they have had hardly any viewings, it sounds like it is still over priced for the current market.

rubsley

Linus2864 wrote: »

Hi Rubsley,

Regarding the building of new houses, perhaps they are more affordable than existing homes as potential buyers may get a discounted price from the builders or may be eligible for FTB help? Also a lot of people are attracted to new properties as they will be covered by a new build guarantee, and are less likely to have flaws resulting from wear and tear.

As for your friend's house, as they have had hardly any viewings, it sounds like it is still over priced for the current market.

That's what I keep telling her. ;-)

Idiophreak

rubsley wrote: »

So my question is, wouldn't the building of new houses just make it even more difficult for people with homes on the market to sell? And isn't it therefore bad for the people that are already living here?

The idea of building more houses is to increase the "supply" in "supply and demand" - thus resulting in lower prices across the board. So, for someone like your friend this is very bad news - as prices will drop further, so they'll generate even less interest at the current price. It's important to remember that your friend *could* sell their house...at the right price. If it's not selling, either something's wrong with the agent or the place is overpriced for the current market.

Building houses is designed to help buyers buy, not to help sellers sell.

laurarobby

rubsley wrote: »

So I'm one of I guess many thousands of people who can quite easily afford a decent chunk of rent but probably wouldn't get a mortgage or be able to raise the deposit to buy a place somewhat cheaper than the one I'm currently renting. Obviously with a bit of time and effort I could rectify that situation but...

Well, I had this idea, and I wanted to float it out there and have people tell me everything that was wrong with it - because in my simplistic head it somehow seems to work.

1. You find a property (they're still going for about 60k where I am)
2. You hit up all your friends and relatives and borrow a grand or two (or more) from each person
3. You buy the place for cash
4. You remortgage it
5. You pay everyone back
6. Et voila! You've got a mortgage

Also:

7. You lend your friends and relatives who are in the same position your savings, and on and on, and soon enough everyone has reached stage 6.

So...what do y'all think?

what a wonderful idea!!!

we are in the same situation pay more in rent then we would a mortgage. we could save a deposit but would take about 5yrs. we are hopefully borrowing the deposit from family and would pay them back monthly over the 5yrs (including a little intrest) this is the only way we would be able to get a house anytime soon. maybe once the house is bought etc we could get a loan and pay the majority back straight away and then owe the bank instead (not sure if that is possible) but we can afford to pay both off monthy. but will see what mr banker says!

Idiophreak

laurarobby wrote: »

what a wonderful idea!!!

we are in the same situation pay more in rent then we would a mortgage. we could save a deposit but would take about 5yrs. we are hopefully borrowing the deposit from family and would pay them back monthly over the 5yrs (including a little intrest) this is the only way we would be able to get a house anytime soon. maybe once the house is bought etc we could get a loan and pay the majority back straight away and then owe the bank instead (not sure if that is possible) but we can afford to pay both off monthy. but will see what mr banker says!

Mr Banker won't be happy about you using a loan for the deposit, no matter if it's from a commercial bank or family. In fact he'll just say "no". You'd be OK if you could prove your family were giving it to you as a "gift" which sadly isn't the case. You could persuade him that it *is* a gift, then pay it back anyway - but that's called fraud.

Makes me wonder, though...you can get shared equity mortgages where you effectively allow another party to buy a proportion of the property you're buying - and then "buy back" that portion of the property at a later date. Typically these mortgages are used by building firms and the government to help people on to the ladder, but I wonder if you could do the same thing with your family. So they buy, say, 20% of the property, you get a mortgage for the other 80%, then at some point in the future you buy back the 20%. Probably adds a bit to the paperwork costs and will limit your choice of lender significantly, but might be a way of making it work - although I've never heard of anyone doing it privately....

laurarobby

ok so what ur saying is we cant buy a house even with help from family? how do they no we will be paying back or not?

dont realy know about eqity or anything i do know we can only get 10% deposit though