Is it legally possible to part buy a property of a family member?

SmokingSpud

Hi everyone,

My cousin inherited a property and has lived there for 3 years but now wants to sell. I'd love to buy her house but its currently on the market for 1.5 times what I'd be able to get unless I wait for the firstbuy scheme in January. Obviously I won't know if the property is sold by then, but at the moment the house is a way overpriced as my cousin is in no rush to sell. Is there legally any way of purchasing the house from her similar to a shared ownership/fractional purchase where you buy a percentage? Or is there a legal possibility to pay her as if she was a bank I.e pay her rent and interest for the next 25 years and therefore get the deeds of the house? I'm asking as the house has great emotional value to me and I wouldn't want it to be sold to someone else. My cousin is fine with whatever as long as she doesn't have to pay rent/mortgage in her new place.

Thanks for your help

princeofpounds

yes, you can buy parts of a house and you can arrange private mortgages.

It is more involved with solicitors as the agreements are typically custom. There are also awkward questions around things like the remaining share the vendor has in the property -do they retain occupation rights? do they get rent on that share? If so how calculated etc.

G_M

You can joint-own.

Either as 'Joint Tenants' or 'Tenant in Common'.

See Land Registry here for explanation.

chris_m

It certainly is possible, that's how I bought my flat.
My parents owned it and I took out a commercial mortgage (i.e through a building society) for as much as I could afford at the time, the solicitor drawing up a private mortgage between my parents and me for the remainder of the agreed value. When I could afford it I took out another commercial mortgage to pay off both the original one and some of the private one, then later I paid off the private one with savings.

The only thing we forgot to do was to clear the second charge in favour of my parents on the land registry records - luckily, I realised whilst my father is still alive so we've been able to get that dealt with more easily than if it had to be done as part of disposing of his estate.

kingstreet

SmokingSpud wrote: »

its currently on the market for 1.5 times what I'd be able to get unless I wait for the firstbuy scheme in January

I presume you mean Help To Buy - Mortgage Guarantee?

This will not help you to buy for more than you can currently afford. All it will do is use the Government guarantee and capital relaxation to provide more 90%+ mortgages.

Your affordability will still be calculated exactly the same way as it is now.

SmokingSpud

chris_m wrote: »

The only thing we forgot to do was to clear the second charge in favour of my parents on the land registry records - luckily, I realised whilst my father is still alive so we've been able to get that dealt with more easily than if it had to be done as part of disposing of his estate.

That has been great help. Thank you. But as I'm not so knowledgable could you explain the bit about your parents and the land registry records please?

princeofpounds

But as I'm not so knowledgable could you explain the bit about your parents and the land registry records please?

When a mortgage is provided by a bank or an individual, they can place a charge on the registration of the house.

This charge basically secures their place in the queue to be one of the first paid should you default on your mortgage. It helps them repossess the property to sell it, it prevents you from selling the property from under their nose and wasting the cash etc. Effectively, it tells anyone looking at the property title that they have an interest in it, that a debt has the property as 'security'.

It's this legal construct that permits mortgage lending. The lender doesn't technically own the property, but they have exceptionally strong rights over it all the same.

In the case cited in the post, it looks like there were two charges. The first charge was that of the commercial mortgage company. They are first in the queue. The second was the private mortgage - they can only get paid in event of default if the building society is fully reimbursed beforehand.

When that poster refinanced, replacing the two mortgages with a single new commercial mortgae, the second charge should have been removed as there was no more mortgage. They (or their solicitor) forgot, and so the charge was 'false'. This would have been a bit of a pain to sort out if their relative was not around to co-operate on getting it removed.

chris_m

Thanks princeofpounds, you summed it up in a nutshell.
It would have been easier if I had been able to clear the mortgage to my parent completely at the time I remortgaged then the 2nd charge would have been removed by the solictor at the time but I couldn't.
I cleared the mortgage to my parents a few years later as a cash payment - hence we forgot about needing to get the 2nd charge removed.

SmokingSpud

Chris_m and princeofpounds thanks again. So from what I've understood a private mortgage is a legal 'loan' agreement with terms on interest, duration and amount owed, correct? Did you take out any insurances? Can any property solicitor draw up this agreement? Also do I understand it correctly that you therefore had two liabilities a month, a payment to your bank for the commercial mortgage and one to your parents? Can I ask why you didn't put the whole property value through the private mortgage and not by way of commercial mortgage? Did you want to reduce the exposure for your parents? Sorry for all the questions, I'm sure my cousin will ask me all those too

chris_m

The private mortgage was drawn up by the conveyancing solicitor and did specify a duration and interest rate - however it was not intended to be paid monthly. The idea was that, as my income rose I could save and/or pay some of it off as and when provided it was all repaid within the specified term, with interest.

jennifernil

It is quite easy to arrange. I have loaned my daughter money against her flat, I had a solicitor draw up the paperwork and register the charge. He also drew up the mortgage agreement stating original amount and interest rate and we both signed it in front of him. The whole thing cost £180.

However, she did already own the flat, so was only releasing capital.