Putting cash into property extension

Pagoda_2016

Hi there

I wondered please whether any of you knowledgeable folk might be able to advise?

I have lived with my partner for 5 years, in his house, worth circa 320k with a mortgage of around 20k left to pay.I sold my own flat 5 years ago and have a lump sum, proceeds from the flat, of about 240k split between 2 easy access savings accounts so not earning much. The house is in my partner's name and he pays the mortgage.We are about to go ahead with extending his house, estimated cost of the build circa 50k, with another 50k max factored in for additional costs.

My question is around funding this investment.It seems madness to me for my partner to get a mortgage when I have the cash available especially as he is 54 and may want to retire early.I am more than happy in principle to put my money into it instead but am conscious that I do not have any stake in the house and don't know how best to protect my investment.At the moment we are talking about me recouping my investment when we sell the house, in about 5 years, and buy somewhere together.Is this the right way to go and how do we formalise it?I also worry what would happen if we split up and how I would get my money back without him having to sell the house or take on a mortgage at this stage in his life..

I am desperate to maximise my savings and this seems a good way of doing so but could really do with some advice.I have no debts, do not own my own property and am expecting an endowment to mature in 2017, worth approx 30k

Many thanks in advance, all thoughts very much appreciated..

colsten

I would consult a solicitor and draw up an agreement that protects my money and any appreciation over the years.

You got to think of all eventualities, incl what would happen if he died. Are you his heir? What if you died? Would you want him to inherit your part of the house?

westy22

The best thing would be for a solicitor to estimate the total value of the property and then calculate the equity proportions and then change the ownership to set you both up as Tenants in Common in those proportions.

This is definitely a case where legal costs incurred is money very well spent.

Pagoda_2016

Thanks so much. I can feel my stress levels subsiding already...

Do you know whether tenants in common status enables me to get a buy to let mortgage if I wanted to go down that route?Seems tricky at the moment as I don't own a property?

Given that I don't really want to be a landlord, would I be better off investing more of a share into the house than looking around for other savings products?

Thanks again...

xylophone

240k split between 2 easy access savings accounts

You are aware of

http://www.moneysavingexpert.com/savings/safe-savings

http://www.moneysavingexpert.com/news/savings/2015/07/safe-savings-limit-to-fall-to-75000-from-january

Buy to let is not the default for not knowing what to do with your savings!

Interest rates are low but why have you not tried to maximise what you have?

You might consider using high interest current accounts (see other threads), other savings accounts, or making a foray into investing - perhaps £15240 into a stocks and shares ISA as a start).

https://www.unbiased.co.uk/ for independent financial adviser.

And make no investment into the house before seeing a solicitor and setting up a TIC arangement?

xylophone

https://forums.moneysavingexpert.com/discussion/5193073

http://www.thisismoney.co.uk/money/article-1583859/Best-savings-rates-General-savings-Internet-branch.html

post 8 may be of help.

atush

Your money is doing pretty much nothing for you so you are right to consider this. But you DO need to own part of the house yourself if you are investing. Otherwise your capital is at risk if your partner leaves you or dies.

And then consider your annual S&S isa allowance, and starting up or adding extra to pensions.

Pagoda_2016

Hi
Do I work on the basis that I am best off putting as much as I can into my partner's property as TIC and investing the rest or would it be better to spread it around more evenly? I know I need to explore both options in more detail but is one of these options a no - brainer?
Thanks again

xylophone

Are you employed?

Is your partner?

What is your pension situation?

Re new state pension https://www.gov.uk/new-state-pension/overview

Have you both made wills? And before you go TIC read and discuss with your solicitor

http://www.practicalconveyancing.co.uk/content/view/9057/1111/

westy22

You need to do some calculations.

You are proposing to put £100k into the new extension. Do you both expect to recover all of that investment when you sell? Will the property be easier to sell after the extension? What is the market for a larger property in that area? How is house price inflation in your area? etc etc.

As an example. You currently value the house equity at £300k (£320k less £20k mortgage). You invest £100k in the extension and associated work. This would indicate that you would then own 25% of the house and your partner has 75%.

In 5 years you sell the house for £500k - you have made a good investment as your 25% is worth £125k. all good.

In 5 years you sell the house for £400k - you have made a bad investment as your 25% is worth £100k and you have lost the interest or investment return that you would have had over that 5 years.

Do you feel lucky?

slowpoke_rodriguez

How would you decide the value the extension adds to the property now and when you sell?
Spending £50k on an extension may not add £50k of value...