Mortgage From Brother

Dreamer77

I'm wanting to buy a house but at the minute I cannot get a mortgage as I was made bankrupt a few years back. My brother would like to help me get back on the property ladder but he as concerns over how best to do it. Our idea was that he would buy a house on a buy to let, I would rent the property off him paying the mortgage interest and a bit extra to go towards paying down the equity. Eventually when I can get a mortgage again I would buy the house off him at the original sale price minus any equity that had been paid. His concerns relate to tax, he already has a buy to let property, and hes concerned about the tax he will pay on the payments he receives from me, obviously the interest portion is tax free but anything above this is taxable as income. The second problem would be if by the time he came to sell the property to me the market value had increased there may be capital gains tax, although either way he will be selling it to me at the original price but this may look like hes selling the property under value to avoid paying tax.

Can anyone advise how this can work?

Thanks

maninthestreet

Can't you get a mortgage with your brother as guarantor?

Dave_Ham

No-one is likely to be able to put this together piece by piece on a public forum, not least of all when you do not use any paragraphs.

There are many implications as you have noted some, but add in Stamp Duty (depending upon price) and whether your Brother has the income to achieve a regulated buy to let mortgage.

What deposit do you have as a % of purchase price and how long ago were you made bankrupt/discharged?

Dreamer77

Hi thanks for the response, yes my brother has the income and already has 2 buy to let properties one in the UK and one in the US.

Have 20% deposit and was made bankrupt 2 years ago hence discharged 12 months ago.

I would proffer if I could get a mortgage with him as guarantor but I doubt its possible, only being discharged 12 months even though my salary is easily enough for the value of house I'm looking for.

I had considered stamp duty but didn't mention it before as this is something I accept we wont be able to avoid on transfer of the property.

Thanks

somethingcorporate

If he already has 2 buy to let properties then surely he is aware that he can offset any reasonable costs incurred in running his business against is B2L income? This is far more than simply interest on a mortgage.

Dreamer77

This is not particularly his business he just moves around alot with his job and then keeps his houses on, on BTL rather than sell when he moves.

somethingcorporate

Ok, well even if he is not a voluntary landlord (often referred to as an 'accidental' LL) he is still running a B2L business and still needs to comply with all the rules around gas safety, declaring income to HMRC etc. If he has 2 properties and thinking of taking on a third it would be worth him taking advice from an accountant to minimise his taxable income. The rent on our B2L property is £950 per month and the interest element of the mortgage less than half of this yet we still manage to pay very little tax due to a number of other expenses that HMRC allow you to offset against your income to reduce tax.