Inheriting an expensive house

Legacy_user

Hi there,

I''m wondering if anyone would have some advice to start me off in the right direction:


- I'm co-inheriting a house with my brother and uncle (that I currently live in) in London worth 1.4mil

- I would like to buy out my uncle's share (because he wants a sale and I don't). He has agreed for the property to transfer to me and my brother on condition he gets his share after taxes. We will be the freehold owners after this transfer.

- My uncles share is estimated to be (after taxes) £400,000

- The house needs around 300k renovation work (inc. 20% contingency), and the valuers said it would be worth 2.5mil once this work is done

- My plan is to renovate the property into 4 flats, live in one, and use the income from the other 3 to pay off the taxes and any loans. Income is estimated after taxes/landlord expense considerations to be £50-60k per year.

- My brother, who has a good job, is willing to commit to the mortgage with me bc it is the family home and he would like to keep his share in it too, and our combined income is just about over £75k.

- Our credit files are not spotless but good, my brother only has student loan debts left and I don't have any debt or credit card debt and 2 times where I forgot to pay on time.

I would therefore be looking for a loan to cover paying my uncle for the house and the renovation. So 700k!

Do you think this is feasible/that we would have a good chance of getting a mortgage? And what do you think I should try for considering the situation? I'm finding it hard to see find information about situations like mine where I am only asking for half of the property's value and not the full purchase price.

I don't think I would be eligible for a first time buyer/buy to let because it's inherited property (?)

I was thinking perhaps an interest-only mortgage would work better to help initial cashflow, and would mean I could invest the income rather than pay it off. I need to live in London right now because of my job but my situation might change in 25 years.

Any ideas to start with would TRULY be helpful. I am 25 and I've only read a few things so far but overall am very new and inexperienced with anything like this.

Thank you!!

martinsurrey

-you need £700k, (£400k for uncle, £300k for renovations)
-you have income of £75k

Sorry but its just not going to happen imo.

but good luck, and make as best use of this as you can

GMS

You would be looking at development finance for this.

Speak to a broker to see how it can be done.

TranceNRG

Yeah as the other poster said you can't borrow 700K on a 75K joint income. You can usually borrow up to 5X the income so in your case about 375K.

Why don't you borrow 300K then renovate the property and then pay your uncle by selling one of the flats?

GMS

You couldn't take a standard mortgage then start knocking the place to bits anyway.

If you can secure development finance then you could potentially repay the borrowing with the sale of flats or look to take a mortgage should you choose to let them out.

Thrugelmir

Be surprised if any lender will fund the entire cost of the purchase and conversion without you putting up some of the money.

Perhaps sell the property and use the released equity to fund a more manageable project to cut your teeth on.

System

Many thanks,

It really would disrupt my life to move, the share I would get would not allow me to live in the same area (which I work in and am heavily invested in personally) - I really just want to continue my life here right now, so if I could make this work and pay it off it would be brilliant.

So I would not be eligible for any kind of regular mortgage, but I would need to get development finance for the project, hoping they will give me the loan based on the projected increase in value? Is there anywhere I can go to read up on that?

And then should I choose to let instead of sell the flats, I would be eligible for a mortgage? How would that work - would I pay off the development finance with the mortgage?

I will definitely have to call some brokers but this has been very helpful in ruling out all the regular options and made it a bit clearer for me. Thank you!

martinsurrey

http://www.aldermore.co.uk/business/business-finance/property-development-finance/

they not only look at the developement, but you as a developer (track record on developments.

as thier risk goes up, so do the rates, so be careful.

Thrugelmir

Glassworks wrote: »

hoping they will give me the loan based on the projected increase in value?

Not how the business works. If you run out of money before the development is complete. Then the lender has an unfinished building. Or the market could take a sudden downward movement due to some currently unforeseen event.

Your combined income would struggle to service the debt interest. At the rates that would be on offer to you.

GMS

You need to speak to a broker. You will not get a residential mortgage due to income and the fact you are planning to change the use.

If you want to do the work then with the value and location of property there should be options for you. However you need to look at the numbers carefully.

The exit from the finance is the key point.

You don't need to 'read up'. You need a broker.

getmore4less

Unless you already own part of the place the IHT bill is 300k.