The Debt Disaster

sparky2604

Hi there, this is my first thread, I have read a lot of posts on the site but have only now found the courage to tell my story in the hope of finding help.

My parents have lived in their house for more than forty years, eight years ago my partner of more than sixteen years and I decided to purchase the property at a reduced rate and have an extension built for ourselves. This went well until we used a cowboy builder who made lots of errors and when questioned vandalised my car. The next couple of builders were not very good either and we spent our remaining budget trying to get the previous mistakes corrected. That was seven years ago and we still only have a watertight shell.

We have spent eight years living with my parents in a four roomed house and until twelve months ago had all managed quite well. Unfortunately my partner has now fallen out with my parents and now I have split from my partner. It is very unpleasant to live together and is almost unbearable on a day to day basis.

My partner and I own the property with quite a large mortgage but we all signed a deed of trust. I would like to stay at my family home but can only get a mortgage of 80k on my own, the property in its current state is valued at 200k. My partner is now reluctant to sign to sell as he does not want my parents to benefit from the sale but I think the three signatures can force the sale. If we were to sell my parents would be unable to buy a house with the proceeds. My idea is to find someone to loan me 100k and although I would be unable to make monthly payments I could repay with interest say 120k in five years fully and with no risk. The money would pay the joint mortgage and joint personal debt and remove my partner from the ownership, I would then be able to complete the extension with the remainder of money and after the five years the property would be worth at least 350k. Not sure if this is viable but hope it could be possible.

It's a bad situation and I would be grateful for any help, suggestions or advice as to what to do.

harrys_dad

Sorry to hear about your very difficult situation. It seems to me that you may need some legal advice to unpick some of these issues, especially regarding ownership and sale. A couple of things I would say though. Firstly, how on earth will "someone" lend you £100,000 with no repayments for five years, especially at the very low interest rate that paying back £120,000 implies? Secondly, if the house is currently worth £200,000 and you are going to spend what is left of the £100,000 borrowed after debt payments on putting it right how can it possibly be worth £350,000 in five years time?

Whilst I appreciate you are trying to keep your parents in the house I cannot see that making huge borrowings, even if you could do it, is a sensible solution to your problems.

Do your parents own any part of the house still? Did you purchase all of it or part of it? Why would your parents expect to be able to buy a house with the proceeds? Did you buy the house from your parents, and if so what did they do with the money? Were they sitting tenants in social housing and you bought under right to buy on their behalf (which may or may not have been legal)?

Maybe a better solution would be to sell the house, and then you and your parents rent somewhere together.

sparky2604

Thank you for very much for responding to my post and I will try to answer your questions.

As far as the shortfall of money is concerned I thought perhaps someone may want an investment that will make them more than current savings rates and where their money is secure. I realise I may have to reduce the years when the repayment is payable.

The property is only worth 200k at present due to disrepair and no sign off on the extension, the new extension has five rooms so the value will be there once complete. It is in an idyllic area in the countryside and has some land with it. It has a lot of potential and if someone else has it they gain the opportunity.

My parents do not own any part of the house, it is jointly owned by myself and partner 50/50. On the sale of the property all four parties get a 25% share after the mortgage is paid. Had all gone to plan the amount they would have received would have at least bought a mobile home. They were not sitting tenants in social housing and their sale money went to pay their remaining mortgage and personal debts.

Unfortunately at my age this was the first and will be my last chance of being on the property ladder, once I let this go I lose the opportunity forever, not to mention the pain I have caused to my family who were perfectly secure in their own home for their retirement until I had such a great idea!

harrys_dad

Well the past iss gone, mistakes and "great ideas" with it. Now is the time to look to the future. The "property ladder" is a mirage these days, and much more like a property snake. Despite what you sat about the extension I still your financial projections are way too optimistic. £100,000 borrowed at 5% pa (which is a rate you are unlikely to get from anyone) still reaches £128,000 with compound interest over five years.

Why not try a different approach? The house may be saleable at the moment, to someone who sees the future potential once it is done up. This may release enough money to pay off all debts, and you and your parents may have enough income to rent somewhere together. Is that any worse than what you have now? Debt free and living together sounds good to me, and I speak as a parent.