Buying house from my brother

katyb6

my brother very kind kindly bought a house for me as I couldn't at the time get a mortgage. The agreement was I would buy him out once I was in a better financial position and we would half any profit minus my deposit and the money I put in to renovate the property. My brother has never lived in the property and while the mortgage is in his name he's never made a payment.  I am now in a position to take over the property and want to get a mortgage which will allow me to pay him his share of our profit and own the house myself so I can invest further with my profit . 
What is the best way to proceed?
Should we approach his lender ?





 

greatcrested

No. Consult an independant mortgage broker and choose the best mortgage product for you.

When you buy the property (using your own mortgage plus savings), the money you pay your brother will be used to pay off his mortgage.

I assume you will pay him the market rate?

Then any profit can be split between you privately as you wish.

Bear in mind that he will have a Captal Gains Tax liability - as he never lived in the property, any gain in value will not be exempt.

katyb6

Thanks so much for your advice . The other thing I wanted to ask was could I use the money I have tied up in the property as my deposit for a new mortgage.  Could we use the same conveyancer? 
I have 10k in the house which was my deposit plus our profit but obviously can't be accessed  until money exchanged ? 
Thanks in advance ☺ 

ACG

Speak to a broker or do the research.

Going to the current lender might be the best option but it might not. You won't save any time or money by sticking with them as you will be a brand new applicant and they will still want a survey. 

Some lenders may make you jump through hoops for this, others won't. I would say just go to the best lender rather than limiting your options. 

AnotherJoe

katyb6 said:

Thanks so much for your advice . The other thing I wanted to ask was could I use the money I have tied up in the property as my deposit for a new mortgage.  Could we use the same conveyancer? 
I have 10k in the house which was my deposit plus our profit but obviously can't be accessed  until money exchanged ? 
Thanks in advance ☺ 

Yes it can possibly be accessed. Whether it's enough is a different matter. 

Say the house is valued at £200k now. And it's gone up by £50k since you bought it for £150k. 
and brother put £15k deposit in it and you £10k.  So brother took out £125k mortage. 

So brother needs back £15k + £125k + £25k (half £50k). £175k. 

So he sells you the house for £175k. You get a mortgage for £175k but the house is valued at £200k by the lender who accept the £25k difference as your deposit. I beleive the term is gifted deposit. This is crucial they value it at £200k and you need the right lender hence you need a mortgage broker. 

Put your own numbers in obvs ! 

katyb6

The house is valued at 120k 
I put 10k in as deposit / brother put none 
I put 15k in to renovate/ brother did the renovations 
He now has  a mortgage on it for 68k 
Originally 75k 
I've paid the mortgage over the 2 years 
So I want my 25k  back and enough to put a deposit down . 
Thank you 😊 

steampowered

The owners and the people on the mortgage are the same. If the mortgage is solely in your buyer's name he will be the sole owner of the property, and that's what will be on the land registry.

From a legal perspective, you are buying the property from your brother. You can try to agree a price which results in an outcome consistent with what you agreed with him. Alternatively, you could pay market value, and he could pay you back some of the money to achieve that outcome.

I would go to an independent mortgage broker who should know which lenders are happy to offer mortgages when purchasing from family members. You will need to take out a new mortgage to pay off your brother's mortgage, so there is no particular benefit to going with your brother's lender.