Investing in Me

qpop

Dynamax wrote: »

Who would be the best person to get advice from, a Solicitor or a Finiancial Advisor, or are they the same?

I'm not sure you need mortgage advice (in which case a mortgage adviser, either independent or employed by a bank could help), the first step would be contacting the lenders directly and asking if the arrangement would affect your chances of getting a mortgage.

Factors that will help will be:
Low LTV
Low income multiples
Some of your own money placed as deposit (have you saved any?)

Dynamax

We have 5k of our own money.

We earn 45K combined income

We pay out £500 in childcare each month.

£220 in CSA payments per month

We have no debt.

20k investment towards the deposit.

atush

The 20K from your Aunt is a loan, and therefore you wont get a mtg if they see that loan. To not delcare the loan could be considered fraud. your aunt could dmead the mone back earlier.

Save up yourself, even if it takes longer. Trim your spending and cut back on luxuries.

Dynamax

What about if it's an 'Investment' in the property, there must be a way round it.

Seems a little ridiculous, but at the same time I can see why they may view it as risky.

Saving up will take us an age, our young child needs his own room.

qpop

Dynamax wrote: »

What about if it's an 'Investment' in the property, there must be a way round it.

Seems a little ridiculous, but at the same time I can see why they may view it as risky.

Saving up will take us an age, our young child needs his own room.

I'd gently recommend a reality check.

Having just done a truly admirable thing (paid off all of your debts), you are now looking for any way possible to jump head first into the largest debt you will ever take on. Not only that, but you are looking to supplement that with a further large debt to a family member.

Let's say your net family income is ~£2900 per month and you obtain a mortgage of £140,000 at 4% PA for 20 years;
Your monthly payment would be ~£750.
Let's say you then agreed a 10 year repayment term at 4% for the other £20,000, this would amount to a ~£205 per month payment - Your housing costs would be just short of £1,000 per month and you haven't paid your utilities yet.

That's not to say it's not affordable - it may well be. The mortgage lenders are still likely to take issue with it, but you'll only know for certain if you get in contact with them.

atush

If it is an investment in your home, the mtg lender will not like it. As they want to be the only one that 'owns' it with you until you pay it off.

They don't mind if she GIVES it to you, but she can't expect anything back for it. So really, you need to forget this pipe dream and save harder.

calypso_rhapsody

I have recently lent money to a nephew to help him buy a house with his fiancee and have a loan agreement that you are welcome to have a copy of (private message me with your email address if you want to take me up on it).

The money has been lent over an 3 year term at a fixed rate of interest (better than was then available on FRBs which was my other possible home for the money). The loan is being repaid by monthly DD. The nephew is currently a trainee lawyer but hopes to qualify before the term is up and then earn a higher salary which will allow him to refinance.

The loan can be secured by a second charge - most mortgage companies will permit that - at least in my experience - but the second charge is obviously subservient to their charge so am not sure that it adds much protection for your aunt. It probably depends how much she trusts you. We've got a few conditions in our loan agreement that offer some protection (eg if they sell up they will pay the loan off and they won't take out other loans ...)

In the end of the day i was prepared to take the risk to help a young man who i believe has prospects to move forward - but you are getting very sound advice that you and your fiancee do need to make sure that what you are borrowing is affordable for you and not just a pipe dream.

Happy to help further if I can - but of course you should take professional advice!!

VT82

calypso_rhapsody wrote: »

I have recently lent money to a nephew to help him buy a house with his fiancee and have a loan agreement that you are welcome to have a copy of (private message me with your email address if you want to take me up on it).

Out of interest, did your nephew already have some deposit? Also, was your nephew upfront with the mortgage provider about some or all of the deposit being in the form of a loan?

Or did you do it the other way and do the loan first, so your nephew went to the bank saying 'I have a deposit, but I also have a loan that will need factoring into the affordability calculation', and then trust that they wouldn't mind there being a second charge placed on it after the mortgage completed?

I'm really interested that this worked. Disintermediation and all that

atush

This brings to mind a recent thread on the pensions board. I will sumarise the tale, but this is meant as no offence to the OP who I am sure is a truthful person.

Parents lent son 50K to enable hom to buy a home, with the understanding they would get this money back some time in future as it was their savings outside their pension.

Some years later, son remortages house, parents being told it was a better deal. Turns out he then borrowed an extra 30K againt the equity near the top of the market.

So now they need the money but there is none to be had as the house is only worth the amt outstanding on the mtg. So their entire 50K was wiped out.

MyLastFiver

The alarm bell for me is that your aunt views this as an "investment" rather than as a helping hand. If she is looking for a return greater than RPI, then will the interest rate on the loan vary, quarter by quarter, as the RPI figures are announced? Or are you/she going to treat the loan like a futures contract and "fix" the loan at a predicted mean RPI over the term? How will you arrive at this figure? How will she? What if your prediction differs from hers? Because you can bet she will push the rate up to the upper quartile of the range of RPI predictions, otherwise it's not worth it to her - she may as well put her money in the Gnat West. Let's say you say 4% and she says 5%. Do you need the money more than she wants to "invest" it? Because if so, you'll pay whatever she asks.

What if (god forbid) one of you becomes ill, loses your job, or for some other reason can't pay the mortgage. Will the aunt want you to sell? What if, in a few years, you have the opportunity to sell up and build a new life beachcombing in Bali? House prices have fallen and swallowed up the £20,000 of equity in your house. Will you pass up the opportunity and stay in the rat race just to pay Auntie back? Because you'd have to.

You want to build a life for your family without anyone else having an investment in it.