2nd property - purchase/borrowing options

eaustin

My partner and I are looking at buying a second property with shared ownership with my partner's brother-in-law who would be unable to get a mortgage in their own name.

There will be three parties involved in the transaction;

P1: age 51, salary £65,000. Existing mortgage balance £113k, base+0.75% (£40k interest only - funds available but currently earning greater than 1.25% after tax) Property valued at £300k.

P2: age 35, salary £20,000. Partner of P1 but not named on exisiting mortgage.
P3: age 40, able to pay rent up to £600 per month and currently in a council owned one-bedroomed flat in central London.



P3 is unable to get a mortgage.

P1&P2 have £100,000 to put as a deposit for a (second) property and then to share ownership based on the proportion of the property that P3 pays as 'rent' with the balance being paid by P1&P2.

The likely value of the property will be £250,000 - £300,000.


I would like some advice on what you think would be the best way of arranging a mortgage for this transaction.

ViolaLass

Who pays for maintenance?

eaustin

ViolaLass wrote: »

Who pays for maintenance?

It would be shared pro rata.

eaustin

*bump*


Is one the advisors on here able to comment? It would be much appreciated.

somethingcorporate

Go and see a local broker.

amnblog

P1 & P2 should stay clear of financial involvement with P3.


If P1 & P2 decide to do what they know they should not be doing they need to engage a mortgage broker - this is a complex and tricky situation.

eaustin

amnblog wrote: »

P1 & P2 should stay clear of financial involvement with P3.

I realise I forgot one important piece of information. P3 is the brother-in-law of P2. P1 & P2 are trying to help P3 and his family get onto the property ladder, as well as hopefully providing a better return than current savings accounts.

I agree it is a complex situation which was why I was seeking some initial advice on here.

Thanks

amnblog

P1 & P2 have good hearts but will regret getting involved.

Pixie5740

P3 has a secure tenancy in London, why give that up?

P1 is not even married to P2 (i.e. no contract in place) yet is willing to get tangled up in the finances of P2's extended family? Sounds messy.

If P1, P2 and P3 are determined to do this then they would need to speak with a mortgage broker as this wouldn't be a BTL since one of the owners would be living in the property, or would P3 just be a tenant? Would you all go on the mortgage and be financially linked?

I think P1 and P2 should look at some other, less complicated way, of investing their savings and leave P3 with the secure tenancy.

eaustin

Pixie5740 wrote: »

P3 has a secure tenancy in London, why give that up?

Because it is a one bedroomed flat. There are 3 people living there and they would now like a separate bedroom for their 7 year old son. In addition by becoming a part-owner they will start to have an asset and not paying dead rent.

eaustin

Pixie5740 wrote: »

P1 is not even married to P2 (i.e. no contract in place) yet is willing to get tangled up in the finances of P2's extended family? Sounds messy.

P1 & P2 do have a legally binding contract, it's just that P2 is not named on the mortgage.




As previously said I know it is complex. I believe there are some very good reasons for looking into this and I will make sure I understand everything fully before putting any pen to paper.


From the replies received the next step is probably an appointment with a broker.