Purchasing a property with a relative

Rubi87

Hiya,

I am just after some advice please. I am looking to purchase a property with my nephew. It is for him to reside in with his siblings. As he is unable to get a mortgage on his own (I earn twice as much as him) I thought I would help by being a joint owner. He is paying the deposit and will pay the mortgage himself. The question I have is- is this legal? I spoke to a broker who told me what I’m doing is not legal. I explained to him the reasons behind me helping my nephew out and that is a personal matter whether I choose to live there or not, as long as one of the joint owners is living there it shouldn’t be an issue. Am I wrong? Any thoughts / advice will be greatly appreciated. 

[Deleted User]

Rubi87 said:

Hiya,

I am just after some advice please. I am looking to purchase a property with my nephew. It is for him to reside in with his siblings. As he is unable to get a mortgage on his own (I earn twice as much as him) I thought I would help by being a joint owner. He is paying the deposit and will pay the mortgage himself. The question I have is- is this legal? I spoke to a broker who told me what I’m doing is not legal. I explained to him the reasons behind me helping my nephew out and that is a personal matter whether I choose to live there or not, as long as one of the joint owners is living there it shouldn’t be an issue. Am I wrong? Any thoughts / advice will be greatly appreciated. 

Which law does the broker think you will be breaking?  I don't think you could get a joint residential mortgage claiming that you'd be living there but you could potentially look at some kind of guarantor style mortgage where both of you are named on the mortgage but only your nephew is the legal and beneficial owner.  This would also have the benefit of being more tax efficient too.

greatcrested

Where do you live? If you already own your own home, this would be a 2nd property for you so subject to extra SDLT.

And if/when the property were sold you could have a Capital Gains Tax liability.

It's certainly not 'illegal' to buy a house jointly with someone, nor is it 'illegal' not to live there.

However as lover_of_lycra says above, most lenders expect the owners to make it their main residence, and their mortgage terms and conditions might require this. A decent broker should find you a lender who'll agree this, or yes, suggest acting as guarantor to your nephew's sole mortgage/sole ownership.

Rubi87

Lover_of_Lycra said:

Rubi87 said:

Hiya,

I am just after some advice please. I am looking to purchase a property with my nephew. It is for him to reside in with his siblings. As he is unable to get a mortgage on his own (I earn twice as much as him) I thought I would help by being a joint owner. He is paying the deposit and will pay the mortgage himself. The question I have is- is this legal? I spoke to a broker who told me what I’m doing is not legal. I explained to him the reasons behind me helping my nephew out and that is a personal matter whether I choose to live there or not, as long as one of the joint owners is living there it shouldn’t be an issue. Am I wrong? Any thoughts / advice will be greatly appreciated. 

Which law does the broker think you will be breaking?  I don't think you could get a joint residential mortgage claiming that you'd be living there but you could potentially look at some kind of guarantor style mortgage where both of you are named on the mortgage but only your nephew is the legal and beneficial owner.  This would also have the benefit of being more tax efficient too.

I'm not sure - the broker got really defensive saying what I am suggesting is illegal! I will look at the guarantor style mortgage, I didn't think many lenders do them now.

Rubi87

greatcrested said:

Where do you live? If you already own your own home, this would be a 2nd property for you so subject to extra SDLT.

And if/when the property were sold you could have a Capital Gains Tax liability.

It's certainly not 'illegal' to buy a house jointly with someone, nor is it 'illegal' not to live there.

However as lover_of_lycra says above, most lenders expect the owners to make it their main residence, and their mortgage terms and conditions might require this. A decent broker should find you a lender who'll agree this, or yes, suggest acting as guarantor to your nephew's sole mortgage/sole ownership.

I live in Birmingham and yes already have my own property on B2L. Also aware there will be an SDLT charge. My nephew will be covering the costs (his mom & dad are helping him out)
I was just a bit confused as I have been quite open in saying I will not be living there but my nephew will be living there with his family so it's not as though we will be illegally subletting! The broker just ended the conversation by saying this is illegal and can be classed as fraud!

davidmcn

Rubi87 said:

greatcrested said:

Where do you live? If you already own your own home, this would be a 2nd property for you so subject to extra SDLT.

And if/when the property were sold you could have a Capital Gains Tax liability.

It's certainly not 'illegal' to buy a house jointly with someone, nor is it 'illegal' not to live there.

However as lover_of_lycra says above, most lenders expect the owners to make it their main residence, and their mortgage terms and conditions might require this. A decent broker should find you a lender who'll agree this, or yes, suggest acting as guarantor to your nephew's sole mortgage/sole ownership.

The broker just ended the conversation by saying this is illegal and can be classed as fraud!

It would be fraud if you got a mortgage by lying in the application about what was going on, and maybe he thinks that's the only way of doing it. It would complicate getting funding (as mortgage lenders generally expect you either to be an owner-occupier or a landlord, not a duo who are one of each) but a guarantor mortgage might be simpler if you're only involved to help with affordability rather than actually wanting to own a stake in the property.

[Deleted User]

Rubi87 said:

Lover_of_Lycra said:

Rubi87 said:

Hiya,

I am just after some advice please. I am looking to purchase a property with my nephew. It is for him to reside in with his siblings. As he is unable to get a mortgage on his own (I earn twice as much as him) I thought I would help by being a joint owner. He is paying the deposit and will pay the mortgage himself. The question I have is- is this legal? I spoke to a broker who told me what I’m doing is not legal. I explained to him the reasons behind me helping my nephew out and that is a personal matter whether I choose to live there or not, as long as one of the joint owners is living there it shouldn’t be an issue. Am I wrong? Any thoughts / advice will be greatly appreciated. 

Which law does the broker think you will be breaking?  I don't think you could get a joint residential mortgage claiming that you'd be living there but you could potentially look at some kind of guarantor style mortgage where both of you are named on the mortgage but only your nephew is the legal and beneficial owner.  This would also have the benefit of being more tax efficient too.

I'm not sure - the broker got really defensive saying what I am suggesting is illegal! I will look at the guarantor style mortgage, I didn't think many lenders do them now.

The broker sounds like a moron.  HSBC do something called a Joint Borrower Sole Proprietor mortgage where both you and your nephew would be named on the mortgage and each have joint and several liability for the mortgage but he would be the sole legal owner.  You could also have a Deed of Trust drawn up to show that you have no beneficial interest which would avoid the higher rate of SDLT and potentially CGT for you further down the line.  This of course means you are on the hook for the whole mortgage whilst not benefiting from the property at all but if you're happy with that it certainly is possible.  There might be other lenders out there offering similar products but HSBC is the only one I know about.  

gettingtheresometime

Stupid question but if he can afford the mortgage without you contributing why can't he just get the mortgage in his own name?

[Deleted User]

gettingtheresometime said:

Stupid question but if he can afford the mortgage without you contributing why can't he just get the mortgage in his own name?

The OP says the nephew is unable to get a mortgage on his own.  

AdrianC

Lover_of_Lycra said:

gettingtheresometime said:

Stupid question but if he can afford the mortgage without you contributing why can't he just get the mortgage in his own name?

The OP says the nephew is unable to get a mortgage on his own.  

But why?

The lenders don't agree he "can afford it"?
No equity?
Unacceptable credit history?

Rubi87

Lover_of_Lycra said:

Rubi87 said:

Lover_of_Lycra said:

Rubi87 said:

Hiya,

I am just after some advice please. I am looking to purchase a property with my nephew. It is for him to reside in with his siblings. As he is unable to get a mortgage on his own (I earn twice as much as him) I thought I would help by being a joint owner. He is paying the deposit and will pay the mortgage himself. The question I have is- is this legal? I spoke to a broker who told me what I’m doing is not legal. I explained to him the reasons behind me helping my nephew out and that is a personal matter whether I choose to live there or not, as long as one of the joint owners is living there it shouldn’t be an issue. Am I wrong? Any thoughts / advice will be greatly appreciated. 

Which law does the broker think you will be breaking?  I don't think you could get a joint residential mortgage claiming that you'd be living there but you could potentially look at some kind of guarantor style mortgage where both of you are named on the mortgage but only your nephew is the legal and beneficial owner.  This would also have the benefit of being more tax efficient too.

I'm not sure - the broker got really defensive saying what I am suggesting is illegal! I will look at the guarantor style mortgage, I didn't think many lenders do them now.

The broker sounds like a moron.  HSBC do something called a Joint Borrower Sole Proprietor mortgage where both you and your nephew would be named on the mortgage and each have joint and several liability for the mortgage but he would be the sole legal owner.  You could also have a Deed of Trust drawn up to show that you have no beneficial interest which would avoid the higher rate of SDLT and potentially CGT for you further down the line.  This of course means you are on the hook for the whole mortgage whilst not benefiting from the property at all but if you're happy with that it certainly is possible.  There might be other lenders out there offering similar products but HSBC is the only one I know about.  

Thanks for the information - it is definitely worth me looking into! Seems like I won't need a broker after all