Mortgage advice - am I losing money?

greenchicken

Hello, just looking for mortgage advice!

My partner and I want to get a mortgage for a flat worth £260k.

I am in a lucky situation in that my partner's mother has offered to gift him 30% (£78k) of the cost as a deposit so we would get a mortgage for the remaining 70%. We'd be responsible for paying back half each of this mortgage each month. If we then re-sold the house later, partner's mum would get 30% of the sale value back and we'd split the remaining 70% between us.

So in essence, I would own a third of the property but pay half of the mortgage, and in return I get a big cash deposit, essentially as a free loan, for as long as we want to live in the house. My partner would own 2/3, and give his mum a third of anything we sell it for.

Firstly, are there any legal issues you can see in this? I am lucky that mother-in-law seems to trust me enough for this arrangement, and anyway the deposit would be gifted to my partner rather than her legally owning a third of the house.

Secondly, am I losing money here? I am paying half the mortgage but only owning 35% of the property at the end of it all. However, I'm not paying any interest on the 'loan' of the deposit and could never gather that much of a deposit in any other circumstances as I have no savings.

Any advice would be much appreciated!:D

Thanks!

Suarez

The mortgage is only for 70% of the house so paying half of that is 35%.

The loan from the mother in law is also saving you £1000s in interest as a 70% LTV mortgage will have a much lower rate than a 90% mortgage.

Thrugelmir

greenchicken wrote: »

Firstly, are there any legal issues you can see in this? I am lucky that mother-in-law seems to trust me enough for this arrangement, and anyway the deposit would be gifted to my partner rather than her legally owning a third of the house.

Your solicitor can draw up a declaration of trust to cover the issues and protect all patrties interests. This will be a legally binding document that would resolve any disagreements should your relationship break down.

kingstreet

You'd own a third of the property, but would be jointly and severally liable for all the mortgage, not just half of it. You may pay half at the outset, but if the circumstances change, you could end up paying all of it.

GMS

The deposit is not gifted as there is a requirement to repay upon sale. Ensure this is fully declared to any lender and that they are happy with the arrangement prior to parting with any money for fees, surveys etc.

Thrugelmir

GMS wrote: »

The deposit is not gifted as there is a requirement to repay upon sale.

Could be gifted to the partner and therefore makes the deposit theirs. Whether they repay the money can be a personal matter outside of any legal agreement. Which will take precedence.

GMS

Thrugelmir wrote: »

Could be gifted to the partner and therefore makes the deposit theirs. Whether they repay the money can be a personal matter outside of any legal agreement. Which will take precedence.

If the deposit is stated as gifted then there needs to be a declaration signed to that effect by the donor. Clearly this is not the case here as the deposit needs to be repaid.

Ensuring a lender is happy with the arrangement is the easiest way to deal with it rather than declare something which is untrue.