Mortgage deposit help from brother?

steve-L

I am currently renting, the rent is killing me being stuck work-wise between Surrey and London. A reasonably modest 3 bed sets me back 1550 + council tax.

My job is somewhat specialised, I get well paid (top percentile) for long hours but of course taxed a lot as well.

Until 5-6 years ago I had spent most of my working life abroad then came back to work for a friend, at the time I had a reasonable deposit (about 90k) that then disappeared .. the company didn't work out and my somewhat nominal salary over the 2 years left my saving severely depleted.

Of course i had no UK credit history either.... still this was before the crash....

Anyway, 4 years ago I found myself expecting a new addition to the family.

This rather unfortunately co-incided with the company folding and me being unemployed for 4-5 months. Having savings and living with my expectant GF on waitresses wages I couldn't claim HB or Income support so I ended up burning most of my savings.... before I got a reasonably well paid job.

I did that for a couple of years, baby born etc.

We saved up and then 2 years later we had a bit of a shock and 2 yr old was in hospital (very seriously ill) for a long time. This pretty much levelled our savings again. Since we had to move house and again lost savings.....

Meanwhile I took out a credit card and loan.
Credit card has been paid in full every month for a year now (about 3k/mo as I put work expenses through it), loan has been paid in full every month and has 5 mo left to run at £450/mo.
Hopefully that will give me some credit history.

We are now looking to buy, OH can't work for another year (economically with childcare costs) as it would cost more than she could earn.

I have some savings but barely enough for a 10% deposit and that would leave me NO safety net at all.

I figure I can afford £1,289/mo. Which is £200,000 @ 5%.
We are currently paying £1550 in rent.

I once co-owned a house (15yrs ago before divorce) am I a first time buyer? Does this make any difference?

Now the strange part
My brother has a spare several million he doesn't mind risking.

He has offered to help me get a house... however he worked damned hard for his money and I don't expect a free handout. But he has offered to front me money on Dad's home before I inherit and a top up.

He owns his own houses outright and has no significant monthly outgoings.

Where we are living (Woking) we can get a small 3 bed for £350,000 (I really need an office/spare bedroom for work as I both work from home and work very unsocial hours) but we can get a really nice 3 bed with garden etc. and room for child to play for £450,000

He hasn't a lot of time... he wants me to bring answers... I have little time myself... I usually work 12+ hrs/d. (My salary might sound great but it doesn't work out anything like you might think on an hourly rate after tax) He will have some people take care of the necessary paperwork once I decide what to do....

My main questions are:
1) Is it worth getting a mortgage or ask my brother to lend me and pay him back...
2) We discussed me getting a mortgage I can cope with and him providing a deposit... he wasn't phased by providing a deposit of £225k making a 50% on a £450k house. Will this get me a better mortgage?

He can't just give me the money, I couldn't afford to pay the tax on it! So I presume it would be a joint ownership?
I'm totally OK with it being 100% in his name ?

3) If we walk into a building society having shopped about and tell them I have my brother happy to lay down a 50% deposit will that be a positive or negative?

4) Price comparison sites seem pointless. Why would an estimate for a 50% mortgage on £450k offer me an incentive of a £500 cashback but charge me £500 for the mortgage fee? (Do they presume I can't read).

I'm presuming a 50% LTV should be getting the best rates?

5) Will getting a mortgage reduce my negotiating power for hammering a better deal on a house price vs cash buy?

nikki1520

Firstly,if he was so minded, he could just give you the money and there would be no tax to pay on it, or any other implications, unless he dies or needs care within the next 7 years (assuming he has depleted his funds to the point he couldn't fund his own care)

Secondly, he can just lend you the money. Visit a solicitor, get papers drawn up with repayment schedule - both of you know where you stand and it will be legally enforceable.

To be honest, if I had this option, I would grab it. It is likely that if your brother would like, or if you would like to pay interest, it will not stack up to the extortionate amounts applied to a mortgage

If you go to the bank, they will want to see evidence of this deposit, and may take into account how you will pay it back, so it would need to be a clear gift - otherwise it will affect their view of you repaying their mortgage.

Cash is king when it comes to buying houses - if you are a cash buyer, you will have an advantage over people who have to wait for agreement from a mortgagor.

I'm sure one of the guys who knows a lot more about this than me will be along in a bit, but that's my tuppence ha'penny

steve-L

nikki1520 wrote: »

Firstly,if he was so minded, he could just give you the money and there would be no tax to pay on it, or any other implications, unless he dies or needs care within the next 7 years (assuming he has depleted his funds to the point he couldn't fund his own care)

Secondly, he can just lend you the money. Visit a solicitor, get papers drawn up with repayment schedule - both of you know where you stand and it will be legally enforceable.

Thanks, it seems someone had a similar situation.
https://forums.moneysavingexpert.com/discussion/1495323

To be honest, if I had this option, I would grab it. It is likely that if your brother would like, or if you would like to pay interest, it will not stack up to the extortionate amounts applied to a mortgage

If you go to the bank, they will want to see evidence of this deposit, and may take into account how you will pay it back, so it would need to be a clear gift - otherwise it will affect their view of you repaying their mortgage.

Yep, the other option is he takes the mortgage in his name and I pay.

Cash is king when it comes to buying houses - if you are a cash buyer, you will have an advantage over people who have to wait for agreement from a mortgagor.

Yep, I'm wondering though if that is quite so clear.

Last time I bought a house (1998) I was working abroad and paid a 50% deposit. The mortgage was easily within my budget (i.e about 1/5th of what I could have gone for) but it was the last days of tax relief... etc.
The fact we had a mortgage of 50% on 1/5th what I could have got was an advantage as it made it more likely we would get it.


I had to stick a lot on this thread to make sense; I'd for completely different reasons prefer to make sure that the house is wholly or partly in his name not mine.

Annisele

steve-L wrote: »

I had to stick a lot on this thread to make sense; I'd for completely different reasons prefer to make sure that the house is wholly or partly in his name not mine.

In that case, why doesn't he just buy the place outright and you rent it from him?

steve-L

Annisele wrote: »

In that case, why doesn't he just buy the place outright and you rent it from him?

Its an option.
My OH wants a place to call hers. (and yes I mean hers not ours)

My view has the words gift horse and mouth in it!!!

A preliminary discussion with her on looking up to £375,000 has produced houses from £450,000-£475,000, nothing 'suitable' below this!

In the same way she complains about renting because we have various things don't work or we have to put up with not changing things... some of these can be quite frustrating ... for instance neither bathroom has a towel rail and the doors won't permit a over the door one but the landlord won't give permission for us to fit a towel rail... or not.... simply won't bother to reply... we can't switch utilities because the landlord can't be bothered to write permission... etc.

Thus she has a goal to get a house which is hers and can be decorated and arranged as she likes....

Can I just say the dynamics are a little complex please.

dimbo61

You do not have to get permission from your landlord to change utility suppliers ( you pay the bills not your landlord)
If your brother is prepared to buy a house for you ( in his name ) and you then repay the loan ( hopefully interest FREE!!) then your OH gets HER home.
You have been unable to save a good deposit yet you WANT a £400/450K property so can you afford it even on a very good income ?

Your brother could help you by You taking out an offset mortgage with YBS and him lending/gifting you the 25% deposit and putting a large amount of money into HIS offset account saving you interest on your mortgage payments

dimbo61

Its called friends and family Yorkshire Building Society !!

Annisele

steve-L wrote: »

He can't just give me the money, I couldn't afford to pay the tax on it!

I missed that bit before - what tax are you talking about?

Can I just say the dynamics are a little complex please.

I suspect there's a lot in the background that affects what your options are.

You and your OH both seem unusually keen not to have stuff in your name. I can only think of two reasons for that - you're married to someone else and you're worried about the divorce settlement, or you're in huge amounts of debt. You don't have to say whether either of those are right, but bear in mind that any advice you get here won't be fully taking into account your circumstances.

steve-L

Annisele wrote: »

I missed that bit before - what tax are you talking about?

I had assumed a gift would count as income....
Which if he doesn't die in the next 7 years seems not to be the case.

You and your OH both seem unusually keen not to have stuff in your name.

Nope, just me!!!!!
She would be delighted ... her potential future solicitors would be delighted also. (I don't want a claim on the house to be a motivation to take my child abroad)
I'd really rather not go any deeper.


No debt at all except monthly CC which is repaid in FULL every month and loan for car which is paid EVERY MONTH and has 6mo left. (Though I could clear it from my meagre savings)
No debt ever except Mortgage from 1999-2004 which was paid every month for 5 years before selling the house. Unfortunately I was working abroad and despite the house making 100% over those 5 years I got non of it.

holly_hobby

For a gifted deposit and a mortgage - being the donor family connection is to you i.e your brother - you would generally have to be party to the mge as the family connection is yours. So avoiding ownership for whatever reason thats not being revealled, I don't think will be an option (even if your partner had sufficient income to svc the mge on her own).

There is no tax of the receipient of a gift, whatever the amount. There may be however, tax on the donor's estate, should they die within 7 yrs of making the gift (see IHT PET regs). This can be addressed and provided for by various methods, including effecting a gift intervivos policy - brothers advisers would assist with this.

To my mind the simplest way to do this, baring in mind that you want your brother to have some security re the arrangement would be to :-

• Let him pch the property for cash in your OHs name
• Arrange a private repayment schedule (mortgage) with him - your sols will arrange this
• You arrange life protection to repay the os mge to your brother, if either of you should die before its repaid
• Brother has a registered charge placed on the property in his name - which will remain in place until you have repaid the private mge arrangement
• Brother delcares loan repayments and any interest to HMRC. He will be taxed on interest recd, but if this is an interest free loan, obv there will be no liaiblity - but the repayments must be delcared non the less.
• It should also be discussed what will happen to this charge and mge, shoud your brother pre-decease you and your repayment of the mge .
• And if you can't sustain repayments - either temporarily or on a more long term basis

Obv all parties need to take legal advice and you should also consider suitable life/income protection as part of your family protection portfolio.

Hope this helps

Holly

steve-L

dimbo61 wrote: »

You have been unable to save a good deposit yet you WANT a £400/450K property so can you afford it even on a very good income ?

My brother knows my fathers house is (supposedly) left to me. Its probably worth 350-375 on the market today (if it could sell).
It's unused as my father is in a nursing home.

My brother wants to 'use it' anyway.... he wants to let 2 of his employees live there. He's happy and able to risk it being worth less and advance me 350.

I pay £1550 rent at the moment so on the 100 difference that's 18.4% APR.
So if I stay on my current income I can pay £1550 which covers me up to 18.4% which seems unlikely in the next 5 years.

If it stays below 5% thats £585/mo (nearly £100 less than now) and my car loan is £480/mo and finishes in 6mo.

Even if I lost my job I could pay the 585 on 1/3rd of my current income assuming tax bands remain similar.