Mortgage with sister

niknok_2

Hello,

I have an odd question!

Me and my fiancee have been trying to sell our house for 10 months so we can buy his grandparents house, who have now both died.

My fiancee's dad has taken out a mortgage on the grandparents house for us so we can move in. We have been in the new house a couple of weeks.

The house we were living in was my fiancee's before we got together and so he is the only one on the mortgage.

My sister currently rents a flat but would like to move into our house. The current mortgage on the property is 86k and the house has been valued at 117k. Yesterday my sister and I were offered a mortgage in principal on the old house. My sister is going to pay 115k for the house and the mortgage is for 103k. Me and my fiancee are going to be using 12k in the equity for the deposit (which is why im going on the mortgage) and my sister will be paying all the mortgage every month and also all the bills and I will obviously no be living there but will be living in my new house.

Is it necessary to have anything written up to say the above or with me being on the mortgage will that be sufficient?

Also, will I have to pay the 12k out of my bank for the deposit for me then to have it paid back to me in the 29k equity?

Many thanks

Nik

Annisele

I'm very confused about what you're trying to do.

I'll set out what I think the situation is - but my understanding doesn't make sense, so I suspect I've missed something vital somewhere!

House 1 (your partner's old house)

• Right now, nobody lives in this house.
• Your sister wants to move in.
• It is owned entirely by your partner.
• The mortgage is £103k, and it's worth £115k.
• You and your sister want to buy this house from your partner. He would get £12k cash in his hands, and you would own the house jointly with your sister.

House 2 (your partner's grandparents'house)

• Right now, you and your partner live in this house.
• It is owned entirely by your partner's father(?)
• It is worth £117k, and your partner's father has an £83k mortgage on it.
• You and your partner want to take out a joint mortgage (for £86k? £117k? some other figure) to buy the property from your partner's father.

You want to have house 1 owned jointly by you and your sister (with you and your sister on the mortgage), and house 2 owned jointly by you and your partner (with you and your partner on the mortgage).

Isn't it much easier all around for your partner to sell house 1 to your sister, your sister to get a mortgage in her sole name, and then you and your partner to jointly buy house 2 with a joint mortgage?

niknok_2

No sorry.

House 1:

My partner owns this house, the outstanding mortgage is 86k.
My sister is buying this house for 115k
Equity 29k to go to my otherhalf

House 2.

My partners father owns it.
We are going to pay the mortgage.

So out of the 29k equity 12k of it we want to stay in the house thus giving us 17k equity which will eventually go into the new house as the deposit when we buy it in 2 years.

Sorry to sound confusing.

getmore4less

CGT issues.

if you are paying the partners fathers mortgage then there will be income tax issues.

Do the lenders know about these living arrangements?

amnblog

Still not sure what you are getting at here Niknok. It seems like you are saying you and your sister are buying from your partner without a cash deposit, and you and your partner are buying from your partner's father in 2 years, again without a cash deposit.

niknok_2

We have a 12k deposit on the old house which my sister is buying. It is coming from my savings, the lender is aware that she will be living there and I wont.

The new house we have a 22k deposit to put down in 2 years. My partners father brought the house with a 50% deposit and it is on a buy to let mortgage... i.e letting to us.

Annisele

I'm sorry but I'm still confused. Going back to your original question "will you have to get anything written up" - I think the answer is yes. You'll probably need a deed of trust, but I don't understand the situation well enough to have the faintest idea what it should say. You should definitely speak to your conveyancer about it.

For the rest, the obvious way forward would be for both house purchases to happen now, with everybody using their own money for their own purchases. So, your sister buys your partner's house now, and you and your partner buy his father's house. There are clearly some reasons why you're not doing that - but I think those reasons are likely to impact on the advice people give you.

Your plan does seem to create a huge bundle of complications. Whether those complications are worth it depends very much on why you're trying to do this - but I appreciate you don't have to share those reasons with complete strangers.

Off the top of my head (and drawing on what other posters have said):

• You'll be creating a capital gains tax liability for yourself - because you'll be a part owner of a property you don't live in.
• There will also be a capital gains issue for your partner's father - again, because owns a house he doesn't live in.
• If the rent you pay is more than the interest only portion of your partner's father's mortgage, you'll be creating an income tax liability for him.
• If your partner's father intends to gift part of the equity in the property to his son at some point, from an inheritance tax perspective it might be better to do that earlier rather than later.
• Your partner's father may have issues with his mortgage - standard BTLs don't allow the landlord to let to close family members, so unless he has a regulated BTL he'll be in breach of his mortgage conditions.
• The fact you are named on your sister's mortgage will probably mean you can borrow less on a joint mortgage with your partner - because the lender will want to know that you can afford both mortgages.
• What happens if any of the parties to this arrangement (you, your sister, your partner, and his father) die, get divorced, go bankrupt, or become too ill to work? You all appear to be linking your financial security together in a way that could go badly wrong.
• What happens if house prices fall (or rise) over the next two years - will you still be buying at the currently agreed price? What if your circumstances change and you can't?