Buying a house at a discount from family

AdrianC

davidmcn said:

DeanR90 said:

AdrianC said:

Your father wants the £40k (23.5% market value) to be kept away from your evil, grasping witch of a future ex...

Seems straightforward. Keep it simple - a deed of trust between you that says the first £(52-8)=44k from any sale goes to you, then the rest is 50/50.

I mean, you aren't planning on splitting up, are you, so this is all academic and just to keep your father happy...

thanks for the information. Essentially yes it's to keep the father happy - my parents split up years ago and split the house so I think he's just overly cautious.

Bear in mind that legally this is just going to be between you and your partner - your dad doesn't have any right to stick his nose in and check what's going on.

But he can, of course, make it a condition of the sale at the reduced price. Nowt he can do to stop it being ripped up the next day, of course...

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princeofpounds said:

DeanR90 said:

Would it be beneficial for my partner to pay off a larger share of the mortgage i.e. 60%? So that she can 'close the gap' so to speak between our equities, so that any future house purchase would be more equal? Edit: Or would she be better saving additional money on the side in an ISA?

That is impossible to answer, because the question behind the question is 'will house prices or other investments perform better in the future?'. She can save the capital however she likes, but obviously if she chooses to put it into house equity you have to adjust the calculations and it can be more complex. 

There are two 'simpler' ways of incorporating her increased contributions. One is to decide from the start that she 'owns' more of the mortgage, and more of the part of the property that is originally financed by the mortgage. She will pay more repayments and more interest, but will receive more of the equity over time as the mortgage shrinks and the house (maybe) appreciates. That works, but is a long commitment and she may tire of paying more than you at some stage.

Or, she can save elsewhere, and then at some point in the future make a large bullet repayment on the mortgage, and you adjust the figures at this point.

The most annoying scenario is regular but uneven overpayments. Because to do it in a very technically accurate way, you would need to value the property on each repayment to determine what % of ownership was bought each time. Do you fancy having regular house price negotiations with your partner? I wouldn't. 

By the way, I should remark on the difference between my suggestion and that provided by AdrianC. His method is something that is chosen by a lot of people because it has the virtue of simplicity, which is not to be underrated when it comes to avoiding misunderstandings between partners. However, it won't be quite as technically fair to the provider with the largest amount of initial capital if the house is held for a long time or inflates in value significantly. If you were planning to get married in the next 3-4 years it would probably work fine however. 

Better to separate the debt from the ownership and any overpayments  just reduce the debt share and adjust that.

as cash, debt from secondary source or debt via mortgage are all the same they  buy a bit of the property.
keep the ownership the same from that point and just adjust the debt so much simpler when there are lots of little debt repayments which is what a mortgage is.

Forget where the money comes from to buy a share,  then pay off your share of the debt.

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DeanR90 said:

Would it be beneficial for my partner to pay off a larger share of the mortgage i.e. 60%? So that she can 'close the gap' so to speak between our equities, so that any future house purchase would be more equal? Edit: Or would she be better saving additional money on the side in an ISA?

see my previous post to do the she pays more calcs,  as for debt reduction or saving you can do a bit of both just don't overpay.
By starting out owning 50:50 just having different debt may work if she can support the outgoings.

If that leaves her short to do stuff you want you can support that by subsidising as and when needed.
eg she can't afford the holiday you chuck a bit more in or buy that extra round when out etc.
It keeps the big one on paper easy to sort out. but you can't come back with I bought this....

if nothing goes wrong it all ends up ok it ends up a shared pot of stuff anyway 
If it does go wrong the exit numbers have rules to follow.

The other thing many forget to put in the trust deed are exit triggers and the rules for a buy out or sale.
eg if she is up the duff by someone else  then how long do you each have to sort out the buyout before it must be sold.


With a £40k discount, depending on dads other finances he may want to consider a DOV so the £40k bypasses his estate and does not end up as a PET. 

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theartfullodger said:

Surely the decent honourable British thing to do is buy and sell at real market prices and avoid any suspicion of tax fiddling.

You are going to have to enlighten us which particular tax you think may be getting fiddled and why.