Never had a mortgage.... but about to get one, question

[Deleted User]

Hi there

As the title suggests, I have never had a mortgage before, but some of you may have seen from other posts that I am about to help my sister out in buying her next property, following on from her divorce.

I have been talking to a great independent advisor and I know that we can get a loan/mortgage for the amount that we need (joint mortgage, sole tenant) plus a little bit more for a new kitchen for me, and I believe that this is very common. But my question is, how does this work?

When my sister (and bil) sell their home, they will take 50% each of the "profit" - does this money literally get paid into their bank account(s)?

Once my sis has her pot of money and we have found a property for her and we have the laon approved, what happens next - does the money get paid to me/my sis and we then pay for the property and the remainig money I can use for my kitchen? Do I need to state that to the lender? Or, does the money get paid direct to the seller of the property that we are buying?

It's just that I am borrowing money (with my sis) to buy her property and then using some of that money to upgrade part of my property - would that be a problem?

I feel a bit silly not knowing how any of this works at my age, but hey ho, willing to learn if anyone can help teach me.

I don't even know the ins and outs of buying a property and the various stages that need to happen, so you probably can't give me too much information!

Thanks in advance

kingstreet

All sale and purchase monies are channeled via a solicitor. You do not get mortgage money direct from lender.

Purchase process;-

Offer agreed
Solicitors instructed
Sales memorandum issued by agent
Purchaser applies for mortgage
Vendor's solicitor prepares and issues draft contract
Vendor completes seller's enquiry forms and returns to solicitor
Valuation/survey carried out
Purchaser pays solicitor for searches
Searches requested
Renegotiation of price due to survey findings - if required
Mortgage offer issued
Purchaser's solicitor receives seller's enquiry forms and raises any enquiries
Searches returned
Responses to enquiries
Purchaser visits solicitor to go through paperwork, hand over ID and deposit
Completion date agreed between all parties
Contracts exchanged
Completion takes place.

maninthestreet

goochie wrote: »

Hi there

As the title suggests, I have never had a mortgage before, but some of you may have seen from other posts that I am about to help my sister out in buying her next property, following on from her divorce.

I have been talking to a great independent advisor and I know that we can get a loan/mortgage for the amount that we need (joint mortgage, sole tenant) plus a little bit more for a new kitchen for me, and I believe that this is very common. But my question is, how does this work?

When my sister (and bil) sell their home, they will take 50% each of the "profit" - does this money literally get paid into their bank account(s)?

Once my sis has her pot of money and we have found a property for her and we have the laon approved, what happens next - does the money get paid to me/my sis and we then pay for the property and the remainig money I can use for my kitchen? Do I need to state that to the lender? Or, does the money get paid direct to the seller of the property that we are buying?

It's just that I am borrowing money (with my sis) to buy her property and then using some of that money to upgrade part of my property - would that be a problem?

I feel a bit silly not knowing how any of this works at my age, but hey ho, willing to learn if anyone can help teach me.

I don't even know the ins and outs of buying a property and the various stages that need to happen, so you probably can't give me too much information!

Thanks in advance

The kitchen you wish to renovate is not in the property you are buying with your sister? Who is this 'sole tenant' you refer to?

[Deleted User]

Thanks for the quick replies.

The "joint mortgage, sole tenant" was the wording that my advisor used, the joint mortgage is with my sister, but I won't be living in the property, she will, with her kids. I may have used the wrong terminology, sorry but I think he said that it was a specific type of mortgage that we needed as only one of us will live in the property.

The kitchen I wish to renovate is in my property with my husband - we have no mortgage so can't take out an additional loan there and the advisor said that shouldn't be a problem.

So, if the monies from the mortgage lender to to our solicitor to make the payment then what happens to the "extra" money added to the mortgage, do they transfer it to us when everything completed?

Thanks.

maninthestreet

Have you actually found a property to buy with your sister?
The deposit you and your sisiter put down, plus the amount of the mortgage will equal the property price - where is the surplus money coming from to fund the kitchen renovation in the property in which you currently reside?

[Deleted User]

maninthestreet wrote: »

Have you actually found a property to buy with your sister?
The deposit you and your sisiter put down, plus the amount of the mortgage will equal the property price - where is the surplus money coming from to fund the kitchen renovation in the property in which you currently reside?

Hi,

Most of this is "hypothetical" at this stage, my sister has offers on her property (still to be accepted) and is looking for a new home for her (she has identified one but not making offers until she has accepted one on her home). But it will be a reality within the next few weeks probably which is why I am asking questions now.

However, when I was talking about borrowing more than we actually needed to buy the property, my advisor said that lots of people do this for renovations to their new home (and to cover legal fees and stamp duty) - so, the only potential issue here is that the money would be used for another property?

Am I missing something here, it is entirely possible, but people borrow extra money to renovate their newly bought homes all the time don't they?

starbarboy

Hi there

From what I can understand from your post what you are wanting to do is take out a mortgage on a property alongside your sister and what you want to know is whether you can use the same mortgage to pay for a new kitchen in your own home.

Lenders will only loan you the amount that you pay for the property less any deposit you have. I am assuming that the deposit is coming from the sale of your sister's current house.

If you want to buy a new kitchen for your current house you would have to pay for it with any savings that you have available or borrow the money separately. Bear in mind that any money you borrow to fund your kitchen will affect the amount you can borrow for your mortgage on your sister's new property.

Hope this helps

Stephen

StuC75

When your sister is looking at new properties the lender may be keen for her to put down as much as possible on the new property to have a better Loan to Value Rate. What kind of range would your sister be looking at? is there a mortgage on the existing house - or is it all equity?

If you are being included to help with affordability,then these limits may come into it?

I read it that you are being included to help with affordability, but that she would be giving you a chunk of money (from the equity received from the sale - not from the mortgage) to pay for your kitchen in return for you providing that help. Its pointless to suggest that would be putting down a deposit that you would then take more out of cash - as thats straight wipes out the equity in the property - which no lender is really going to like!..

As you will be a joint applicant you would both be joint & severally liable for the mortgage payments, what happens if your sister falls ill \ loses job.. You would then be liable for the full mortgage?..

This could then have an impact on your own home if the sisters is repossed and you are on the deeds for your family home..

[Deleted User]

starbarboy wrote: »

Hi there

From what I can understand from your post what you are wanting to do is take out a mortgage on a property alongside your sister and what you want to know is whether you can use the same mortgage to pay for a new kitchen in your own home.

Lenders will only loan you the amount that you pay for the property less any deposit you have. I am assuming that the deposit is coming from the sale of your sister's current house.

If you want to buy a new kitchen for your current house you would have to pay for it with any savings that you have available or borrow the money separately. Bear in mind that any money you borrow to fund your kitchen will affect the amount you can borrow for your mortgage on your sister's new property.

Hope this helps

Stephen

Thanks, so, in order to release some extra capital, my sister would need to put less of a deposit down and give me the £10K and then we get a mortgage for the remainder? Very odd as I mentioned this to the advisor and he said that this was not an unusual thing to do at all (apart from the fact the money might not be used in entirely in the property that we are buying together).

JimmyTheWig

goochie wrote: »

Thanks, so, in order to release some extra capital, my sister would need to put less of a deposit down and give me the £10K and then we get a mortgage for the remainder? Very odd as I mentioned this to the advisor and he said that this was not an unusual thing to do at all (apart from the fact the money might not be used in entirely in the property that we are buying together).

It sort of doesn't matter where the money comes from for the kitchen. If you want to look at it as mortgage money that is fine.
But it obviously has to come from somewhere.

Lets say your sister has £50k in equity from her sale.
You need £10k, between you, for the costs of the move (stamp duty, etc).
You, personally, need £10k for your kitchen.
The property to be purchased is £200k.

So you need to pay out £200k+£10k+£10k = £220k.
And you have £50k.
That means you need a mortgage of £170k.
This is 85% LTV (as 170 is 85% of 200).
It isn't the 75% LTV that you might expect from having a 25% "deposit".

If the sale and purchase happening at the same time? I.e. is your sister moving from the property that she is selling to the property you are buying together?
If so, the money from the sale of the house will go to the solicitor.
The money from the joint mortgage will go to the solicitor.
The solicitor will pay off the old mortgage.
The solicitor will pay for the new house.
The solicitor will pay any costs.
This will all go on a "completion statement", which ends in an amount of money that either you owe the solicitor or they owe you. In this case it will end up that the solicitor will owe you £10k, which he will give to you. You can then spend that on improving the house you've just bought (common), going on a luxury holiday (not as common), doing up your existing property (very rare) or something else entirely. it is your money. It is up to you what you spend it on.

The important thing is that you work out how much mortgage you need to include the £10k for your kitchen.
That will result in a lower deposit being used to buy the house than if you didn't borrow money for your kitchen.
And so it is the same as if your sister gave you £10k from the deposit money.

starbarboy

Yes - assuming your sister would be willing to give you the money - that may be one option you old consider.

Stephen