Buying a property with my sister - first time buyer, lots of questions

[Deleted User]

Hi all,

I am looking for any advice that you lovely people can give me. My sister is getting divorced (she has 2 kids both in full-time education for the next few years - Uni and college age) and once the final settlement is agreed and the house is sold she will have enough capital to put down around 50% deposit on a 2 bed flat but won't be able to get a mortgate large enough to cover the rest.

We live in London and because of the kids education, moving out the area is not viable at the moment.

My husband and I have agreed that we would like to help them out financially and I propose that my sister and I get a joint mortgage (I have a much higher salary and no mortgage on my property with my husband). We would need to borrow approx. £130K in order to get them a decent 2 bed place.

Is this possible, ie, I won't be living in the property with my sister, we hope to set up a joint bank account (not sure if that is possible either) and we will both put an agreed amount in monthly to cover the mortgate and we will get this agreement put down in some legal format etc.

Would I qualify as a first time buyer (with my sister on the mortgage) - and are there any benefits to this?

Is what I propose to do possible, would the mortgage lender care that I don't live in the property so long as they get paid?

Am I missing something huge here?

Now I have to make an appointment with my bank to talk about mortgages as I have no idea about the many different types, but I feel that I should also get an independent mortgate adviser but again, don't know where to start - do they charge or like IFA's do they make their money from the provider not the client?

Any information, top tips etc would be greatly appreciated.

Thanks for reading, happy to give more detail if needed/relevant.

ch3101

The only reason that they have FTB mortgages is to offer people with small deposits a chance with low costs at the start but a slightly higher rate due to the higher risk.

You wouldn't be going for one of those if she has a 50% deposit.

My advice is for both of you to go to the bank and speak to a mortgage advisor and they'l' be able to tell you what you can and can't do.

It will be fine setting up a joint account.

What are you going to do after that mortgage is paid off though, given that you'll own ~25% of her house?

ACG

Would I qualify as a first time buyer (with my sister on the mortgage) - and are there any benefits to this?

No, both parties have to be first time buyers, not that it makes a huge difference in the current climate anyway.

Is what I propose to do possible, would the mortgage lender care that I don't live in the property so long as they get paid?

Some might, others wont be too bothered so long as one of you are living there, but it is possible yes.

Now I have to make an appointment with my bank to talk about mortgages as I have no idea about the many different types, but I feel that I should also get an independent mortgate adviser but again, don't know where to start - do they charge or like IFA's do they make their money from the provider not the client?

I would suggest you speak to a real mortgage advisor. Partly because they will know about how to ensure your investment is financially protected for both of you (Im not saying a bank advisor wont, but the products they have available to do this are very limited... and usually more expensive than through a broker).You also get the benefit of speaking to someone that can access more lenders than just your bank.

As for the commission/payment... There are numerous different ways and its all down to how the broker charges their fees. Some charge a fee and take the commission, others take just the commission, some charge a fee and rebate the commission.

GMS

Have you considered borrowing the 130k against your own residential property (assuming valuation) and purchasing the flat for cash, your 50% an sisters 50%. You could both be registered as owners and any arrangement to pay the mortgage could be agreed privately.

Could be a plan b worth looking in to

[Deleted User]

ch3101 wrote: »

The only reason that they have FTB mortgages is to offer people with small deposits a chance with low costs at the start but a slightly higher rate due to the higher risk.

You wouldn't be going for one of those if she has a 50% deposit.

My advice is for both of you to go to the bank and speak to a mortgage advisor and they'l' be able to tell you what you can and can't do.

It will be fine setting up a joint account.

What are you going to do after that mortgage is paid off though, given that you'll own ~25% of her house?

Thank you for your quick response, very helpful.

In answer to your last question, basically I look at it as a long term loan (never to be paid back if that is the case, she is my sister and will do all I can for her and the kids).

In reality, we both own 25% of our childhood/family home, which our mother lives in (and when she passes we will inherit the property in total), at which point it will easily pay off this mortgage and my sister will have the capital to pay me back my investment at that point, with no interest).

My sister and I turst each other 100% but we will get this drawn up somehow legally and we will both take out insurance to cover the mortgage payments should something happen to either one of us.

[Deleted User]

GMS wrote: »

Have you considered borrowing the 130k against your own residential property (assuming valuation) and purchasing the flat for cash, your 50% an sisters 50%. You could both be registered as owners and any arrangement to pay the mortgage could be agreed privately.

Could be a plan b worth looking in to

Interesting idea, but the property that I live in with my husband (with no mortgage) has his name only on the deeds (it was bought for him by a relative).

Also, whilst my OH would do anything for us, this is my sister not his and it is something that I want to do without putting his/our home at any risk, hope that makes sense.

holly_hobby

HI,

Yes from a mge point of view no issues with you purchasing with your sister, and you not residing there (assuming you both pass the status checks of the lender).

There is however an issue with CGT for you.

As this will not act as your primary residence at all (from what I can gather), you will be exposed to your share of any beneficial gain on disposal - less permitted reliefs, allownaces and exemptions - even though it appears this will be the only property you own.

With regards to legal ownership, if you purchase under a joint tenancy (JT) then upon you death your sister will become the sole owner under joint beneficial ownership - and be left to service the mge on her own. Which may not suit your own family situation or requirements.

To this end, you may wish to consider holding the property under a Tenants In Common (TIC) arrangement, where you can not only unequally divide the legal ownership, but you can each bequest your share on death to either each other, but more importantly anyone else i.e in your case your spouse/issue etc.

How you hold the property (JT or TIC) has no effect on any mge liability, which regardless of any legal ownership split, will remain jointly and severally (singularly) the remaining owners responsibility.

So in addition to the mge and pch side of things, you will need to update your wills, consider how you want to hold the property, life assurance and how paying the mge will be split.

If you write as TIC or JT and you want your sister to retain the property post your ealier death, you may wish to consider effecting some life assurance to repay the os mge on at least your 1st death (written under trust for the benefit of your sister). This would be valuable if under TIC your family wish to realise (cash in) your share, and/or under either JT or TIC, if the property becomes solely her's, she can't afford to maintain the mge without your financial help - the life cover would redeem the os debt. Of course you may agree that should you pre-decease her, she simply sells the property for division between her and your family.

How you elect to hold the deeds, what will happen on death, updating of wills, trust deeds (if reqd re contributions), life assurance and a clear understanding between everyone involved, upon what terms the pch and agreement is made, is imperative for family harmony.

Hope this helps with the basics - your conveyencer and adviser will assist.

Holly x

Ganga

Hi goochie, i can not give any advise but would like to take the the time to say well done for helping your sister.It is the attitude of people like you that makes me think that not every one has the " whats in it for me attitude"
I hope it all works out for your sister and yourself

Ganga

clumsymoo

I am the OPs sister and I agree Ganga she is the most amazing sister I could ask for and has literally saved my life with her generosity and kindness.
With her support the kids and I will be safe and secure and happy.
She has a heart as big as the moon and ill never be able to thank her enough.
X

PasturesNew

You have to look at the What Ifs.

What if .... you split up, you lost your job, your mother had to go into a care home and house sold to pay fees, your mother needed financial support to stay in her own home (to pay for carers at £30/day), your sister took up with a new fella in 5 years' time, anybody in the equation wanted to claim benefits, you all had a big falling out over something trivial that blew up .... write down all the What Ifs and make sure you know what your Exit Plan will be.

holly_hobby

clumsymoo wrote: »

I am the OPs sister and I agree Ganga she is the most amazing sister I could ask for and has literally saved my life with her generosity and kindness.
With her support the kids and I will be safe and secure and happy.
She has a heart as big as the moon and ill never be able to thank her enough.
X

Its a beautiful thing .... :A

.......

Hope the points raised in my earlier post, help with ensuring the process and legal & financial arrangements are well thought out ...

Wish you guys well ....

H xx