Mortgage with sister

flower1677

Back in 2010 I took out a mortgage with my sister to purchase a flat. It was to be an investment for me and somewhere to live for her. I initially put down the deposit and she is repaying half of this back to me. We both pay half the mortgage, maintenance and ground rent.

My situation has since changed and I earn half of what I was earning back in 2010. I can no longer afford to pay half of the mortgage and pay rent for where I am living along with all my other outgoings. My sister does not earn enough on her own to buy me out, especially as the flat has been valued at £199,995 (we purchased for £150,000). She can not afford to buy anywhere else either.

This leaves us with a predicament. She would like to stay in the flat and I would like to cease paying out every month for it. She has suggested 2 options below and I would appreciate peoples advice on them, if it's fair or if there is another way around it without selling it and making her homeless, thank you :

Option 1

We would basically wind-back to the start and readjust our shares to 1/3! for you and 2/3 to me.

I would pay you the difference in amounts between what you have paid as a 50% shareholder (£16060.67) and what you would have paid over the same time as a 1/3 shareholder (£10707.1) which is!£5353.56. From this cash you could then pay the monthly mortgage amount of c.£217.09!for 24 months, in which time your childcare costs will decrease, you could change jobs to one with more hours/higher salary. For the difference in the deposit I could add this to the money I am still repaying (£2500 difference in deposit figures). You would in effect have a two year payment break.

Expenses : Sols fees to redraw the Deed of Trust, interest rates could rise meaning the money pays back fewer than 24 months, you’d pay 1/3 of the maintenance & GR

Considerations : If we re-mortgaged we could get a lower monthly payment as our Loan to Value is fab at the moment and get a fixed interest rate to guarantee payment months covered !

!

Option 2 - Agree what % of the property you own at the moment

!

Agree what % of the property you own at the moment, ie!!

X = Value of Property £195000

Y = Profit after outstanding loan amount deducted (195000-129000=66000)

Z = Half of Profit as a % of today’s value!16.92%

You pay no further monies, your stake remains at 16.92%, upon sale later you recieve 16.92% of any profit.

conradmum

If you can fathom your way through all of that you're better at calculations than I. How about option 3 - you sell the flat and pocket half the profit each? Sounds fairest to me.

Is there some formatting reason the options are littered with exclamation marks? Very irritating.

Pixie5740

I vote for option 3 too. Neither of you can afford the flat, sell it and move on. Your sister won't be homeless, she could rent somewhere until she earns more and has saved a bigger deposit.

Auntie-Dolly

Can you live in the flat together?

Annisele

How big is the flat? If it is two bedrooms, then my option 3 would be "she lives in her room, and a lodger lives in yours -and the lodger's rent all goes towards your half of the mortgage".

Up until now I think your sister has an absolutely fantastic deal. The way I see it, she owns half the flat and she's effectively renting the other half from you - but she's not paying anything for the other half, so she gets to have a place that's twice the size of the one she can really afford.

flower1677

Sorry about the ! Not sure how or why they are there.

It is a 1 bed flat and I agree that she has had a fantastic deal I just wish she could see that. I do feel as if I should break away now becuase it has made a good profit in just under 4 years and I can get a buy to let on my own and invest my money this way. Thank you for your replies.

Kynthia

So you pay half the mortgage and rent where you live while your sister pays half the mortgage but no rent? How is it right you both get the same profit? Clearly you agreed this arrangement at the start so cant complain now, but you can't afford to subsidise her any more. If you had rented out the place you would both be paying out half the mortgage, rent on your own places, but also receiving half the rent from the tenant which would be better for you financially and more equal.

If she can't afford to buy you out or start to pay you half rent on top of her half of the mortgage (without changing you ownership or profit share) then you need to sell and make a clean break. It is going to be difficult for your relationship so try to keep it as factual and polite as possible.

mikey_l

How much is left of the deposit she owes you? She seems to be in a better financial position. If she's willing to buy out some of your equity, can't she pay you the remainder of the deposit she owes you instead? This way it will give you some financial relief, allowing you to continue your 50/50 arrangement, for the time being at least.

TBagpuss

What is the ultimate plan? If the original idea was that you were buying as an investment, why is your sister paying back your deposit?

As you don't live in he property, then it would be reasonable for your sister to be paying you an occupation rent for your half of the flat - one way to work that out is to have half of what market rent would be - that would in most cases cover your half of the mortgage and possibly give you a small profit each month. Another option would be for you to charge her rent equivalent to 50 of the interest payments on the mortgage. That way, you would pay the capital repayment element on your 50% of the mortgage each month, she would pay her half of the mortgage, and the interest on your half, which would likely be cheaper for her then renting while making it affordable for you.

it sounds as though you have effectively been subsidising her housing for the past 3 years and she now wants you to effectively give her part of your share of the equity as well.

Option 2 is the fairer option for you, but it only gives you the benefit of the rise in the value of the property, and the capital you've paid off the mortgage. It does not give you anything to compensate you for the money you have been paying to subsidise your sister's housing costs for the past 3/4 years.

I would sugges t that you remortgage to get a better fixed rate, your sister pays the full amount as a mix of mortgage and occupation rent, you agree not to ask her for anything by way of occupation rent for the last 3 years,, and you both agree that at the end of the fix on the new mortgage the flat will be sold - to your sister if she can afford to buy you out at that point, and on the open market if she can't.

That would give her two years to save and/or look at alternatives, takes you off the hook for the mortgage you can't afford at present, and also allows her to see whether she can realistically afford the property without your support.

pinkshoes

Has your sister being paying rent on the flat?

She should have been paying rent for 2 years, at a below market rate (on the basis she looks after the upkeep), of which you receive half and she receives half.

Both your options sound very complicated and could end up with arguments.

Selling is a good option.

BigAunty

An option rather than making herself homeless?! You have to get out of that mentality that moving to affordable accommodation after selling up because neither of you can afford it is a route to homelessness. I hope you are not hearing sob stories from her.

I haven't got the appetite to wade through the complex calculations you've outlined. Selling up when circumstances change, especially affordability, is the norm, not a last resort and quite logical.

It was quite dumb to buy a 1 bedroom property with a sibling anyhow - the chances of you moving to take up a job, starting a family or wanting to move in with a partner is high. Surely at the bottom of your heart you both knew it could only be a temporary arrangement?

Your sister is very comfortable there, so no wonder she is resisting and her strategy is how not to lose out in terms of having to move, nor to be financially stretched.

Suppose you meet the love of your life and want to buy a property together and she still objects to selling up, since she's resisting now? You might struggle to get a new mortgage with this existing commitment and you'd have no choice but to take her to court to force a sale and that's very expensive and long-winded.

Try to convince her the best thing is for both of you to have a fresh separate start.