Getting a Mortage to Buy Half An Inherited House

crashedandcool

I tried speaking to a broker, but it keep going round in circles and he could not explain as he got bogged down.

I'm inheriting half a house and I want to buy the other half. I'm looking to know if lenders will do a mortage on half a house. The way I see it the house is worth 300k and what I need to know is how the banks see the mortage against the houses value. I'm going to say I want a mortage for 150k with a deposit and could afford repayments with that, but if the bank see if as a 300k mortage with a deposit then I could not afford that nor qualify to borrow that much.

At the moment I don't want to get bogged down in meeting the criteria or my situation or the condition of the house. Just in principle how a lender looks at someone wanting to buy half an inherited house.

K_S

@crashedandcool Not a particularly unusual scenario. Generally speaking (specific lenders will have slightly different policies) if you can afford (as per lender calcs) and meet criteria to borrow 150k at 50% LTV, it should be fairly straightforward.

The 150k of equity that you already hold will be the "deposit" and the 150k mortgage raised will buy out the other owner.

crashedandcool said:

I tried speaking to a broker, but it keep going round in circles and he could not explain as he got bogged down.

I'm inheriting half a house and I want to buy the other half. I'm looking to know if lenders will do a mortage on half a house. The way I see it the house is worth 300k and what I need to know is how the banks see the mortage against the houses value. I'm going to say I want a mortage for 150k with a deposit and could afford repayments with that, but if the bank see if as a 300k mortage with a deposit then I could not afford that nor qualify to borrow that much.

At the moment I don't want to get bogged down in meeting the criteria or my situation or the condition of the house. Just in principle how a lender looks at someone wanting to buy half an inherited house.

crashedandcool

K_S said:

@crashedandcool Not a particularly unusual scenario. Generally speaking (specific lenders will have slightly different policies) if you can afford (as per lender calcs) and meet criteria to borrow 150k at 50% LTV, it should be fairly straightforward.

The 150k of equity that you already hold will be the "deposit" and the 150k mortgage raised will buy out the other owner.

This is where I get confused in regards using the equity from the half I would have. How does that define the Mortage amount I'm taking out. Am I taking out a 300k mortage with a 150k deposit or a 150k Mortage with no additional deposit as I have 150k equity. It worries me in case this makes a difference in what the repayments would be.

kingstreet

You are to inherit 50%. Someone else will inherit the other 50%. If the market value is £300,000, you need a 50% mortgage of £150,000 to buy out the other beneficiary.

Ensure you purchase from the estate before the property is transferred. This will help you avoid lender issues over length of ownership.

ACG

If you think about what the position would be on completion of the mortgage.

On completion you would own a £300k asset and have a £150k mortgage. All is good. 

ader42

Your broker sounds like a numpty.

It’s just a £150k mortgage on a house worth £300k where you have 50% equity / LTV.

It’s no different to when someone else owns a house worth £300k, has £150k equity and wants a new mortgage from a new lender. Basically the same scenario as anyone remortgaging their own home. 

The lender will get their valuation to make sure they think it is worth £300k - so you can get the lower interest rates based on 50% LTV

dimbo61

Consider the selling costs if you were both interested in selling the property.
However you are both savings the estate agents charge 

Annisele

Possibly your broker was confused over you wanting a mortgage on "half a house" - I don't think that's actually want you want to do.

It sounds like you want a mortgage loan secured against the whole house, but the loan will only be for half the value of the house (50% LTV).

The bank won't see it as a loan for £300k. If you borrow £150k, then the bank will see that as a £150k loan. Buying the rest of a house after inheriting only half of it is a very normal thing to do, and lenders are used to the scenario.

crashedandcool

Thanks so far. I think I've got the answer I want, just not worded in the way to make it click exactly, but fine. To be fair to the broker yes I thought he was a numpty, but a lot of the context was not in the conversation.

Would the value of the house make an impact on the repayments or is it usually based on the LTV?

Wanting 150k does the fact it's worth 300k and I have half equity really mean it's a LTV of 50% or is there an expectation I need to put some cash in as a deposit?

kingstreet

Your equity is your deposit and the LTV is 50% usually resulting in the lowest possible rates.

julicorn

I think the confusion might come from you describing it as potentially a '300k mortgage'. 
It's important to understand that if you borrow say 100k to buy a house that's worth 300k, then that's not a '300k mortgage', but rather that is taking out a 33% LTV mortgage of 100k. 
In this instance as well, although your house is worth £300k, you already own half of it and only need £150k (plus legal costs and all that) to buy the rest of the house to own it completely. So you need to take out a £150k mortgage with the property value being £300k, LTV 50%, deposit 50%. The 'deposit' being your existing equity. 

(Sorry if that was clear already, it just sounded like you were talking about the house value being the same as the mortgage amount / name)