Helping my brother buy a house – my options??

Dave_01

I’m new to the world of mortgages, so I am looking for some general advice/ideas.

Here is the situation. My brother is a single parent with two children. He works part-time but due to his level of income and having two dependants, there is little chance of him securing a decent mortgage. But he is currently paying rent of £600pcm – so he could afford to pay a mortgage.

I own a property mortgage-free. That will remain as it is and I will continue living where I am. I have never had a mortgage.

I have £26,000 in savings which I am willing to put down as a deposit for my brother on a new house, and I am willing to take out a mortgage in my name (if possible). Apart from the deposit, I would want my brother to make the repayments and effectively it would be his house. According to online searches, I could borrow circa £140,000.

Here are my questions.
Presumably, if a mortgage is taken out in my name, the mortgagee will require me to be living at the new property?
Is there any legitimate and legal way I can take out a mortgage on a new house but have my brother living there and him making the repayments?
I did think about the buy-to-let route, with me effectively being my brother’s landlord. I would charge no rent and my brother would pay the mortgage repayments, but presumably the repayments (with the house being in my name) would be seen as taxable income being paid to me?

As you can see, I am brainstorming ideas, and I would really appreciate your thoughts.

If I haven’t been clear about anything, please ask.

Thanks
Dave

csgohan4

Tread carefully here, family and money shouldn't mix, don't give any money to family unless you don't expect it back


Needing a mortgage and renting to family is generally not accepted.


If you bought it with a mortgage and rented to your brother without telling the lender amounts to fraud so not an option.


As you own a property you will have extra stamp duty

Tom99

[FONT=Verdana, sans-serif]There are a few lenders who offer Joint applicant sole proprietorship, so you would be liable for the mortgage but not own the property. That will save you the extra 3% stamp duty but you will still somehow need to secure your deposit, which I assume you are lending, not gifting, to your brother.[/FONT]
[FONT=Verdana, sans-serif]Does you brother have a deposit as well?[/FONT]

TrickyDicky101

What's the source of your brother's current income? Is any of it benefits that could be impacted by ownership of property?

ACG

What Tom says was my initial thoughts.
You would both be liable for the mortgage - so no issue with which of you lives there.
It would potentially avoid the stamp duty charge.
Your brother may even be able to use the HTB ISA.

The major downside I can see is that you would be liable for the mortgage but not have your name on the deeds. It sounds like you are both pretty close so probably not an issue but something to think about.

amnblog

Dave_01 wrote: »

Here are my questions.
Presumably, if a mortgage is taken out in my name, the mortgagee will require me to be living at the new property?

No Dave. Neither do you necessary need to be the legal owner.

Dave_01 wrote: »

there any legitimate and legal way I can take out a mortgage on a new house but have my brother living there and him making the repayments?

Yes, this is Legal.

Dave_01 wrote: »

I did think about the buy-to-let route, with me effectively being my brother’s landlord. I would charge no rent and my brother would pay the mortgage repayments, but presumably the repayments (with the house being in my name) would be seen as taxable income being paid to me?

The repayments are not income and not taxable.

With the right advice you can assist you Brother Dave. However, you should bear in mind that sorting his world for him will simply complicate you own. An additional Mortgage on a property he is using will restrict your options if your life changes.

Get some good advice from both an Accountant and a Mortgage Broker on this one.

teameffort

I've recently read an news piece about a new mortgage product from Mansfield BS which ''is a family buy-to-let mortgage allowing the borrower to let the property to their children, parents or other close family member and benefit from considerably lower rental cover.

The new deal means the borrower can charge their family tenant a rent equal to their mortgage payment - rental cover of 100 per cent in other words - making it a much more affordable option to help children or parents''.

not sure if this of any use to you, but may be worth looking into similar products on the market.

Near the end of the mortgage or if / when your brothers circumstances change you could come to an arrangement where he buys the property off you?.

Dave_01

Thank you for all the responses. It is clear I need to seek some professional advice on this, and I will do.

To answer some of the points made above, what I think I want to achieve is the house remaining in my name until the mortgage is paid off. I wouldn't feel comfortable putting my name to a mortgage if I didn't have control over the ownership of the house. If possible, I want my brother to pay the mortgage repayments, and then he would acquire an interest as the mortgage is paid off, either gradually or by me signing the house over once the mortgage is repaid.

His income is supplemented by benefits but he is convinced it is only based on his level of income - so home ownership wouldn't affect that either way.

It would be just me providing the deposit.

I do appreciate the advice about complicating my own circumstances, but my priority is sorting my brother and his kids.

Tom99

Dave_01 wrote: »

Thank you for all the responses. It is clear I need to seek some professional advice on this, and I will do.

To answer some of the points made above, what I think I want to achieve is the house remaining in my name until the mortgage is paid off. I wouldn't feel comfortable putting my name to a mortgage if I didn't have control over the ownership of the house. If possible, I want my brother to pay the mortgage repayments, and then he would acquire an interest as the mortgage is paid off, either gradually or by me signing the house over once the mortgage is repaid.

His income is supplemented by benefits but he is convinced it is only based on his level of income - so home ownership wouldn't affect that either way.

It would be just me providing the deposit.

I do appreciate the advice about complicating my own circumstances, but my priority is sorting my brother and his kids.

That way you will pay the extra 3% stamp duty when you buy and capital gains tax on market value less your original cost when you eventually hand it over. Maybe handing it over in parts will get you several years CGT allowance I am not sure.

pjcox2005

Think I've sent you a PM but not showing up in sent messages. Let me know if you don't get it though.