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Co-owning a house with a relative

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Comments

  • Baby_Angel
    Baby_Angel Posts: 540 Forumite
    Ninth Anniversary 500 Posts Name Dropper
    How will things like repairs and decoration be paid for? 50/50 or will your friend be expected to pay 100% as your friend is the occupant. Like others I think the plan is bonkers with no benefit to either sibling. 
    My friend is thinking they would be paying for everything as an occupant. Not expecting any involvement from the sibling financially other than the initial investment. Probably naively thinking relationships never change. 
    SPC 08 - #452 - £415
    SPC 09 - #452 - £298
  • Baby_Angel
    Baby_Angel Posts: 540 Forumite
    Ninth Anniversary 500 Posts Name Dropper
    Does the sibling own a property already ? Unless the friend is in financial trouble, if I were your friend I'd wonder why the sibling had thought of this.
    Yes. With their married partner. The sibling probably didn't consider that investment in my friend's house will also be included in marital assets if they were to divorce. My friend will be discussing this with their sibling now. 
    SPC 08 - #452 - £415
    SPC 09 - #452 - £298
  • getmore4less
    getmore4less Posts: 46,882 Forumite
    Part of the Furniture 10,000 Posts Name Dropper I've helped Parliament
    It has come up before a lot.

    Structured as a debt could work better than actual ownership.

    The terms of the debt repayment can exclude being called in on demand.
  • wilfred30
    wilfred30 Posts: 878 Forumite
    Fifth Anniversary 500 Posts Name Dropper
    Presumably, your friend is sure that their sibling's £200k doesn't need 'washing' 😮
  • Baby_Angel
    Baby_Angel Posts: 540 Forumite
    Ninth Anniversary 500 Posts Name Dropper
    wilfred30 said:
    Presumably, your friend is sure that their sibling's £200k doesn't need 'washing' 😮
    It is all fine  :)
    SPC 08 - #452 - £415
    SPC 09 - #452 - £298
  • saajan_12
    saajan_12 Posts: 5,153 Forumite
    Part of the Furniture 1,000 Posts Name Dropper Combo Breaker
    Does the sibling own a property already ? Unless the friend is in financial trouble, if I were your friend I'd wonder why the sibling had thought of this.
    Yes. With their married partner. The sibling probably didn't consider that investment in my friend's house will also be included in marital assets if they were to divorce. My friend will be discussing this with their sibling now. 
    We're all getting excited about the joint ownership (which is a terrible idea in itself) but the pertinent thing here is this ^. 
    Sibling is trying to hide cash / assets in the event of a divorce. 
    Provided the cash would be a marital asset (depending on how long the marriage is, when acquired, kids, etc etc) then turning the cash into a property, or any other investment doesn't change that.
    - Sibling's name would still be on as beneficial, legal and registered owner of 50% of the property.
    - Alternatively loaning the money to friend still means the note is an asset. 

    Friend would be advised to not put their house in the middle of such a dispute. They might trust sibling not to, but sibling's partner could be awarded the share, and following a divorce with people hiding assets etc, they might move in themselves, or expect a rental return, or block a sale (eg if friend wants to move) house. 
  • Baby_Angel
    Baby_Angel Posts: 540 Forumite
    Ninth Anniversary 500 Posts Name Dropper
    Thank you MSE forumites for all your input and taking the time to reply. Lot of issues to consider. I have forwarded them to my friend. 
    I am with you all and feel this is not the right decision. But sometimes even the best intentions are not good enough. I will let them decide based on the good facts and experiences provided by you all. 
    SPC 08 - #452 - £415
    SPC 09 - #452 - £298
  • TBagpuss
    TBagpuss Posts: 11,237 Forumite
    Part of the Furniture 10,000 Posts Name Dropper
    Quite apart from all of the reasons others have advanced why this is a bad idea, it also seems like a poor idea financially for your friend - mortgage rates are currently at an historic low, and your friend has a substantial amount of equity and a good jb, so is probably able to get a decent mortgage deal.
    If the sell half their house to their sibling, while they would be clearing the mortgage and therefore saving the interest they'd otherwise pay, the sibling will then be entitled to 50% of any future increase in house values, and while none of us can predict what house prices and interest rates will do in future, it's well within the bounds of possibility that your friend would lose more in terms of the increase in the house value, which their sibling would be entitled to, than they would save in mortgage interest.

    Quite apart from the risk of losing their home or getting caught up in messy court proceedings if their sibling is planning this in a doomed  attempt to hide assets or keep them out of their spouse's grasp, in any divorce. If the sibling has £200,000 they want to invest in property , suggest they buy a flat or other BTL. If your friend wants to reduce their mortgage, suggest they talk to a good broker and look for a better rate, or a longer term. 
    All posts are my personal opinion, not formal advice Always get proper, professional advice (particularly about anything legal!)
  • md258
    md258 Posts: 186 Forumite
    100 Posts Second Anniversary Name Dropper
    edited 12 May 2021 at 9:07PM
    What happens if the house falls in value, say to £300k? Will the sibling want their £200k back or be happy with £150k? Or even £100k?

    Does the sibling own another property? If so, would they have to pay the 3% SDLT surcharge?

    A way of reducing the joint pot if a divorce is coming may be spending that only benefits one party- ensure that they have new sports equipment, any dental/cosmetic work they want done etc. It could take a while to get through £200k this way though.
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