Tenants in Common - one party mortgage

benn1863

Hi

My brother and I jointly own a leasehold flat that we rent out together with no mortgage. The flat is worth around £140,000.  I would like to release 75% of the equity of my 50% share with a buy to let mortgage for some home improvements of my
own and to pay down my residential mortgage. 

My brother is risk averse and not interested in taking out any borrowing. 

I have a few questions if anyone can help:

Is this possible? Would I need a broker for this or is it easy to do yourself? Is there an indemnity I can take out to assure my brother and is this expensive? 

davidmcn

benn1863 said:

My brother is risk averse and not interested in taking out any borrowing.

In which case, the idea is a non-starter. Why should he risk his half of the property for your borrowing?

benn1863

That’s why I’m asking if he can be indemnified against that risk to completely appease him? 

benn1863

I should have also said, brother is not concerned about us defaulting as the cost of borrowing on our 50% is minimal at less than £100 pcm.  He just he is mortgage free and has no interest in taking on extra borrowing.

My question is more around is it practically possible to mortgage our 50% and if so, can we indemnify to be ‘belt and braces’ and completely fair to him.

davidmcn

You can't mortgage half a house (how would the bank repossess it?). You'd both need to grant the mortgage over the whole property, even if it's only you who's meant to be repaying the loan. Which means your brother then might have his half of the property repossessed because you default on your loan.

Banks aren't fond of getting into that sort of situation, in case they end up with a complaint about why he was signing over his property for a loan which he wasn't even getting the benefit of. So even if your brother was completely comfortable with it, I think you'd have practical difficulties arranging it.

I doubt your brother can get insurance against the risk of you defaulting on your loan.

amnblog

The day the day the Lender can repossess half a house will be the day they consider mortgaging it.

csgohan4

This is why money and family shouldn't mix, if it goes wrong, you lose more than money. 

MovingForwards

amnblog said:

The day the day the Lender can repossess half a house will be the day they consider mortgaging it.

They could always take a chainsaw and brick cutter to it, straight down the middle, but then it may not be the right half they take away.

benn1863

Thanks for the responses. 

We’ll not be falling out over it. 

My brother is mortgage free and draws a nice rental income, as do I from the flat so I get why he wouldn’t want to remortgage as he has no need for the money.
When I’ve done my sums we’d be better off by a few quid by remortgaging but if it’s a non-starter, so be it. 

Out of interest, if we were to mortgage the entire property jointly but I took some equity and he left his in, is an indemnity/ contract an option in those circumstances where I accept liability for the mortgage and indemnify him against anyone loss?

davidmcn

If it got to the stage where you couldn't keep up with your mortgage payments, an indemnity from you isn't going to be much help to him, is it?

benn1863

Nope it’s not but nor would I be defaulting on an £80 a month interest only mortgage. Thanks again.