Buying house with parents

alexkerr

zzzLazyDaisy wrote: »

You need to be clear what you mean by this. Either the three of you are buying the property together or you're not.

So, is this a correct summary:

You and your OH, and your PiL are buying the house together.
PIL is using cash to buy his share
You and OH are taking a mortgage to fund your share.
All three of you will be named on the deed (presumably as tenants in common with a deed of trust setting out the respective shares in the house that you each own?)

Yes that would be a fair summary. I understand that another issue might be how many people can be on the deeds. One lender already told me its a maximum of 2.

For the mortgae we require, my wife should be able to on her own get this so I wouldn't be on the deeds and one of the PIF could also be on. I suppose this gets round it but I understand that if I am not on the deeds I am putting myself at risk?

zzzLazyDaisy

alexkerr wrote: »

For the mortgae we require, my wife should be able to on her own get this so I wouldn't be on the deeds and one of the PIF could also be on. I suppose this gets round it but I understand that if I am not on the deeds I am putting myself at risk?

More to the point, does your PIL understand that he is putting himself at risk? It is not possible to have a mortgage on half a house - the people named on the deeds as owners must also be on the mortgage. So if one defaults the other (s) are legally liable. In other words, if you / your wife were made redundant and couldn't pay the mortgage, your PIL would be liable for the full repayments.

He would also be liable for CGT on any increase in value of his share of the property, as he is not living there, so potentially eroding any return on his investment.

That's completely disregarding the possibility that, depending on his age and his current work situation, he may not even meet the lenders criteria for a mortgage.

kingstreet

Only those named on the mortgage can be named on the deeds.

alexkerr

PIFs dont need a mortgage. They own our house outright and have several other properties outright. They are retired. They are aware of CG tax already

We just want to sell this house we are in to raise the captitol for the new house with us topping up with mortgage

I am trying to see the risk from lenders perspective. Currently we have income protection and life and and cic and plan on getting decreasing mortgage protection aswell so i am not sure if all this is taken into account

Obviously the cash from PIFs would be seen as a loan but would the lender have to look at the whole picture and loan deal and decide if risk was too high

From a pure numbers pov we have been told we can get a mortgage for 220 in which case payments would be around 800. We only need half that at the most so the loan back to PIL (current rent is 475 on 112 k house) plus 400 for mortgage is only 75 different so if lenders are willing to lend us 220 surely the risk of defaulting is the same in both scenarios?

zzzLazyDaisy

alexkerr wrote: »

PIFs dont need a mortgage

You don't get it do you?

You said that PIL is buying the house with you, and will be named on the deeds.

That means he MUST be a party to the mortgage, and meet mortgage criteria.

It might be that you would consider the mortgage to be 'your' mortgage, and you would make the repayments. But you cannot get a mortgage on half a house. The mortgage is secured over the whole house, including your PIL's share, and your PIL must be a party to the mortgage.

NervousHomeowner

alexkerr wrote: »

I am trying to see the risk from lenders perspective. Currently we have income protection and life and and cic and plan on getting decreasing mortgage protection aswell so i am not sure if all this is taken into account

Obviously the cash from PIFs would be seen as a loan but would the lender have to look at the whole picture and loan deal and decide if risk was too high.

From a pure numbers pov we have been told we can get a mortgage for 220 in which case payments would be around 800. We only need half that at the most so the loan back to PIL (current rent is 475 on 112 k house) plus 400 for mortgage is only 75 different so if lenders are willing to lend us 220 surely the risk of defaulting is the same in both scenarios?

The risk has nothing to do with income protection or life cover or decreasing mortgage protection. People have already explained that the risk is that you are essentially getting a 100% loan - You are getting a loan from your wife's parents and a loan from the bank, you aren't putting anything in yourself. A lender wouldn't give a mortgage to someone who had taken out a loan from a bank to make up their deposit, this is basically no different.

Yes, the lender would have to look at the whole picture and I can't imagine they would be comfortable with you not putting in any money yourself. Again, why is it not an option for you to stay put for a few years and save up your own deposit? Or at least a partial deposit, with a small amount from your PILs as a top up? Or you and your PIL buy the house together with them on the mortgage, so they own the house with you? Perfectly possible, my partner and I have 3 people on our mortgage (Me, Him, my Mum).

From a pure numbers POV, it doesn't matter. Those figures were calculated purely on the numbers, without the situation taken into account - so they will loan you 220k with a deposit of X. The problem will come when the lender finds out that the deposit of X isn't your money and is actually a loan. Again, it doesn't matter if you're only borrowing half of what you are allowed or if you'll be paying only slightly more than you currently pay for rent, the thing that matters is that the money for your deposit is a loan.