Borrow more than purchase price

Nowhereandhere

Long story short - agreed to buy family house for 40k (it is worth 120k) but it needs a lot of work. I’m a FTB. I asked the mortgage advisor if I can get a mortgage to do this and he advised I cannot mortgage and remortgage at the same time, which is effectively what I’m trying to do. I can however take out a mortgage for 60k and then be gifted back the 20k by one of my relatives.. 

this feels dodgy to me - thoughts?

DullGreyGuy

Its not clear if you are trying to buy a house from one of your family or buying a house suitable from a family from a random seller?

You say it's worth £120k but needs a lot of work... so is the £120k the current market value or what the value will be once the work is done? If it's a family member selling it and it's currently worth £120k why are they selling it at £40k? Starts smelling like tax evasion or deprivation of assets. 

pjs493

You need to speak to a solicitor. There are lots of complications related to buying a house for less than its market value from relatives. My husband and I planned to buy a property off his parents a few years ago and they wanted to give us a discount but ultimately it just wasn’t possible without falling into all sorts of tax issues, complications, etc. 

In the end we didn’t buy it for a number of reasons, but mostly due to this. It was for sale at a time when the market was booming and we could only afford a certain amount. His parents wanted to knock a little off the market value so we could afford to buy it as a rental property. It sold on the open market for more than we could afford in the end. A couple of years later its value dropped. The new owners ended up in negative equity, but whether this bothered them or not, I don’t know. If they planned to own it long term they probably didn’t care because it bounced back.