Mortgage Query, 3 parties involved

Jimbob88

Hello,


I'm new to this so looking for help and advice please


My partner and her brother bought a house together in Dec 2015, he has never lived there and now we have discussed and talked about the possability of me moving in with my partner.

It has been agreed that i will make payments towards the mortgage cost and bills etc, but what ever money i put towards the mortgage payment i will get back once the house sells further down the line.


My question is i would like something in writing explaining this and detailing the current situation but i have no idea what document/paperwork i need, any help would be appreciated.

Thanks

AnotherJoe

Offhand, two options.

1. See a solicitor, explain the situation, get them to draw something up.

Make sure it includes house price inflation, eg suppose this situation continues for 5 years and the house is worth 20% more at that point, then you should expect a 20% uplift on your contribution.You'll need to have the house valued now to provide a start point,you'll also need to agree on how the expenses of selling are apportioned.

2. You buy the brother out and you and partner take on a new joint mortgage.

Why arent you doing (2) ?

Jimbob88

Thanks for the advice!


Yeah that has been mentioned also regarding prices rising etc, i think it will be best to sit down with a solicitor as you have said.


Unfortunately i dont have the funds to buy him out and he wants to keep his half as an investment.


Thank you!

Pixie5740

How much does the brother pay towards the mortgage currently? Half? Will he continue to pay the same amount once you move in?

It sounds as though you'll need some kind of Declaration of Trust drawn up and it is sensible to get this all down in writing as one sibling seeing the property as an investment and the other seeing it as a home with her partner has the potential to get very messy.

AnotherJoe's option 2 seems the most sensible to me although I appreciate the brother won't agree to this. A possible option 3 would be for the siblings to rent the whole place out and you and your partner buy somewhere together.

eddddy

1) You can draw up your own agreement to that effect, if you want - and get all parties to sign it (maybe with witnesses).


2) If you think it's possible that the other parties would try to renege on the deal, you could write out the terms and then ask a solicitor to encapsulate them into a more formal loan agreement.

(A solicitor is less likely to leave loopholes in the agreement, which could be challenged in court.)


3) If you're really concerned, you could make the loan agreement a legal charge secured against the house. So then, they cannot sell the house without your consent, and 'run off' without paying you back.

(But the mortgage lender would need to agree to this. And they may be alarmed, if the arrangement sounds like sub-letting etc.)


It would be for you, your partner and the brother to agree the terms - that's not really something to ask a solicitor to decide on.

Jimbob88

Thank you guys, much appreciated!

getmore4less

You need to do a proper equitable analysis.

start from purchase date to the date you start contributing to work out what the shares are between them and what model they have been using.

then you do another new equitable shares moving forward.

Separate the living costs from the equitable costs.

plenty of examples on here and the housing board on how to do this.


Be careful with solicitors the evidence here is many don't do numbers well and often don't understand equity.

getmore4less

once you have the financial side done you then need to document the exit scenario and how you each get your shares if they ever want them.

getmore4less

equitable shares is to do with the debt you service not the cash contribution you make.

Any interest on debt you service is a sunk cost you cannot get back it is called renting the money to buy the equity.


if you describe the current model they are using that would help come up with one that includes you.

Jimbob88

Thats brill thank you,


I am not sure on the model they currently use, we havent got that far down the line yet. I will take this information and look further into it.


where abouts could i find examples or a lil more detailed information?

saajan_12

I would make sure it's very clear how much you are contributing to:
* utilities, CT (50% sounds fair)
* mortgage interest
* mortgage capital repayment.

Get the house valued for when you move in, and then if the house sells for x% profit (or loss if x is negative) after selling costs etc, then you get back

(100+x%) * YOUR MORTGAGE CAPITAL REPAYMENTS

Note the brother would also be liable for CGT for the period he is not resident in the property - this is his concern not yours but make sure he knows to factor this in before he expects to deduct it as a selling cost that affects everyone.