First time buyers advice

Hcm1989

Hi,

Hoping for some insight/help on this subject. My boyfriend and I are both 23 and renting. We'd like to buy as soon as possible. Fortunately both of us have sets of parents who are willing to help us out- his parents have said they are willing to invest (not donate) £150,000 towards a deposit. They would want their investment back upon sale of the house, plus whatever profit upon sale proportionate to their investment. My parents will give me £8,000 or so, as a gift.

My boyfriend's plan is to buy a three bedroom house, £450k max, and rent two bedrooms, covering the majority of the mortgage repayments. We have plenty of friends who are willing to rent. Combined, we earn £60k. However, we are concerned about whether our plan is realistic and foremost, what the legal implications may be having three parties involved (me, him and his parents). I've looked into group mortgages in relation to deposit sharing and what happens when we eventually sell- is there any contract we can draw up which says who would be entitled to what? Also, my boyfriend only wants his name on the mortgage, which makes me concerned as to whether I'd be entitled to anything should we separate.

Has anyone any experience in this or similar and what can we do?

Thanks.

ACG

Lenders wont accept the £450k as a deposit and they certainly wont accept someone having an investment in the property.

I think this is a no go from the start.

I stand to be corrected but i dont think this will ever happen.

kingstreet

Only those named on the mortgage can be on the deeds. If you are not party to the mortgage you can't be a joint owner.

A deposit of £150k means a mortgage of £300k. On £60k joint that's 5x income. There are a few lenders which will go that high, but you won't get the lowest rates in the market. Without your income, which won't be included if you aren't party to the mortgage, £300k is a pipe-dream.

The gift/loan situation will not be accepted by a lender if the "gift" has strings attached, such as an interest in the property or a charge taken after completion. The holder of the first charge can deny a second charge.

Income from lodgers won't be taken into account in setting a maximum mortgage borrowing.

A deed of trust is needed to set out who gets what in the event of a split up, with a loss, with a profit, or at break-even.

GMS

Parents on the mortgage may well have implications on the maximum term which may well affect affordability. Do the parent(s) have an income?

Renting rooms needs to be checked with the lender.

Several points to be clarified and agreed here. Ensure any lender knows the situation fully prior to application or use a broker

Hcm1989

ACG wrote: »

Lenders wont accept the £450k as a deposit and they certainly wont accept someone having an investment in the property.

I think this is a no go from the start.

I stand to be corrected but i dont think this will ever happen.

Why would £150k from a parent not be accepted?

are there not 'parent offset' type mortgages where this can be done?

GMS

Hcm1989 wrote: »

Why would £150k from a parent not be accepted?

are there not 'parent offset' type mortgages where this can be done?

If it was a gift without reservation it wouldn't be an issue. If there are strings attached it may be an issue with most lenders.

Securing the deposit will be the key. The terms of the reayment will be crucial

ACG

Because its not a gift, its an investment.
Kingstreets post is quite useful. There is just that many issues with what you are looking to do im not sure it would ever get a lender to back it.

Hcm1989

Thanks for all your help.

Do you think it would be too risky for me to invest given that my contribution is relatively small and I am potentially liable for half the mortgage should I be named on it?

I feel that my boyfriends parents - although they haven't said anything- have reservations about my involvement due to this. I would be too if I were in their position and offering such a high % of deposit.

GMS

Hcm1989 wrote: »

Thanks for all your help.

Do you think it would be too risky for me to invest given that my contribution is relatively small and I am potentially liable for half the mortgage should I be named on it?

I feel that my boyfriends parents - although they haven't said anything- have reservations about my involvement due to this. I would be too if I were in their position and offering such a high % of deposit.

Without you being included and your income used it may well not be possible. You could be kingmaker in the deal.

Regardless of the legal points of any agreement drawn up there needs to be some trust betweem all parties involved in a transaction like this. Forgive me if I am speaking out of turn but your parents 8k may well be the same to them as the 150k of your boyfriends parents in real terms. Both sets of parents are willing to help albeit with differing numbers.

IF you can find a lender willing to protect your boyfriends parents deposit then you would need an agreement drawn up. If the lesser depoait from you is causing an issue with the larger deposit providers then consider staying away from the transaction. May well not happen without you anyway

pc1271

You could buy a house for £150-£200k and regularly put cash into a savings account, then buy a bigger house in a few years time. With a joint income of £60k, do you not think a half-million pound house is a little excessive?

orcocan

you're 23, do you really need a 450k house? you guys dont want to overstretch yourselves...