Buying property with sibling: Financial options

getmore4less

Getting the mortgage is one for the brokers, people do it so it will be possible just choice of lenders and rates may be restricted.

p00hsticks

george4064 wrote: »

Thanks gm4l, do you see any problems with my sister owning half of the property (thus paying half of the mortgage) but not actually living in the house.. Would we be able to take out a joint mortgage for the whole house (and then split the payments)?

The potential problems that I see for her are;

a) she'll be liable to pay income tax on the rent she receives

b)when you come to sell, if the house has risen significantly in value she may be liable to Capital Gains Tax on the profit

c) if she wants to buy a property of her own she'll preobably need to pay an additonal 3% Stamp Duty as it will be classed as a second property

kinger101

george4064 wrote: »

Thanks gm4l, do you see any problems with my sister owning half of the property (thus paying half of the mortgage) but not actually living in the house.. Would we be able to take out a joint mortgage for the whole house (and then split the payments)?

That particular question is probably more suited to the mortgage forum. I think most people on here would agree the main problems with this are those highlighted by AJ and GM4L already.

I know this scenario happens accidentally many times (as one co-owner moves out and lets their room), but it's not something you'd design. As well as the exit problem, from your sister's perspective, having a sibling's home as a business asset also presents issues. You might get scenarios where there are conflicts between your personal relationship and her financial interests. For example, you need the tenant/lodger out ASAP because you don't get on with them. They are evicted and then there is a large void. Who makes up the shortfall in the rent needed to pay the mortgage?

Pixie5740

I don't understand why you are even considering this convoluted set-up with your sister. It looks as though you could afford to buy somewhere on your own. Possibly even a 2-bedroom flat which would allow you to have a lodger.

I can't really see an upside for your sister in any of this. You will not benefit from the HTB ISA bonus as one of the conditions is that you need to live in the property being purchased. She will face the additional 3% SDLT when she eventually flies the nest. Then there's the income tax on rental income and capital gains tax when the property is eventually sold. That's before getting into the fact that as you'll be the one living in the property you'll be in one in control of the situation. Possession is 9/10ths of the law!

What exactly are you trying to achieve? Do you want to buy a home or do you want to buy an investment property?

george4064

Pixie5740 wrote: »

I don't understand why you are eyeing considering this convoluted set-up with your sister. It looks as though you could afford to buy somewhere on your own. Possibly even a 2-bedroom flat which would allow you to have a lodger.

I can't really see an upside for your sister in any of this. You will not benefit from the HTB ISA bonus as one of the conditions is that you need to live in the property being purchased. She will face the additional 3% SDLT when she eventually flies the nest. Then there's the income tax on rental income and capital gains tax when the property is eventually sold. That's before getting into the fact that as you'll be the one living in the property you'll be in one in control of the situation. Possession is 9/10ths of the law!

What exactly are you trying to achieve? Do you want to buy a home or do you want to buy an investment property?

I am trying to buy a home. I'd love to be able to buy one on my own, however I don't have enough salary to get a decent mortgage.

I only earn about £22k, which means I can only afford a small mortgage of about £100k (4 times my salary)... With my savings I know I can afford a pretty decent deposit, but I just can't see it working with a large deposit but small salary (thus small mortgage)..

Pixie5740

Have you actually been to see a mortgage broker to discuss your options? Is there nothing available to buy in Southampton in your price range (Over £60k in savings plus a mortgage of circa £100k)?

If all your sister's borrowing power and savings are tied up in your home how will she ever be able to buy a home for herself? Is combining your incomes and savings even enough to buy the sorts of properties you are looking at?

Red-Squirrel_2

Would your sister still be living with your parents? If you're both my to late twenties she isn't going to want to do that for very long...