Joint mortgage with brother request

John1125

Hi - my brother has been through a protracted, nasty divorce and wants to take over mortgage and remove his now ex-wife.  All agreed by court etc.
However, bank won't lend him money as he had a period of not-working (during mental health crisis during divorce). Is now stable and on decent money and covers costs each month but bank refusing to cover him on his own.
He's approached me and asked me to take out a joint mortgage with him. I have paid off my own mortgage and nearing retirement - with 2 grown kids in uni.
I want to help him but bit worried about any potential pitfalls. 
Wife and I have been fairly careful with money over years - had small inheritance from my late mum and paid off mortgage and saved rest to help own children when they finish uni/need deposit for their own houses etc.
However, brother gave most of his inheritance to ex-wife (her timing coming after him after mum died was something) and also his kids.  He's nothing left. 
However, he has always lived a good life, worked hard/earnt well, and his kids also (currently travelling round world and working job-to-job).  We've not had such rich lifestyle: instead working 9-5 and saving/paying off debts etc so we could enjoy ourselves a bit in retirement once house paid, uni done, kids supported etc. We're now only a few years away from that. 
Brother's request is a bit of a curveball and although I don't mind putting my name on a mortgage to help my brother - as he's only family I have left - am wondering if he does default on payments  (poor health / lack of work etc) would I be liable? I told my wife we could sell his house if worst happens but she thinks it won't be that easy and they could come after my income/her income and or savings we had for our own kids.  She also doesn't think my brother would be willing to move even if he did default. 
Can anyone advise?  I do want to help, and keep good family relations etc, but I also don't won't to expose myself/my own family financially by being too nice or naive. Thanks 

Brie

My understanding is that if you are both on the mortgage you are both liable.  So if either of you stopped paying the other has to cover it all.  But you would also be named on the deeds so you'll own half the house.  

So the thing is to get a solicitor to cover all the eventualities about what if something happens to you, happens to brother, how do you get your name off the mortgage and deeds eventually.  Who pays the CGT tax that this will be in your name as it's not your main residence.  etc etc. 

Your wife seems to be seeing a lot of the downsides.....which should include what happens if/when he remarries and potentially gets divorced again.   

JGB1955

If you're both on the mortgage are you both on the deeds too?
If you're on the deeds you may have to consider SDLT as a second home owner.
CGT may be payable on any profit once the property is sold in the future.

MWT

John1125 said:

Wife and I have been fairly careful with money over years - had small inheritance from my late mum and paid off mortgage and saved rest to help own children when they finish uni/need deposit for their own houses etc.

It is a tough choice to make, but I would suggest declining the request and cite your plans to be in a position to help your own children as and when they need support.

Your wife is right to be concerned as if things do not go well for him you will find yourselves paying the mortgage for him and potentially with a fight on your hands to force a sale.

You could try to anticipate the pitfalls and have an agreement drawn up, but it isn't going to be easy to get something that can be easily enforced if the effect is that he would be homeless.

Also, if you are only a few years from retirement, you may find it difficult to do as he wishes anyway...

Newbie_John

Bank won't lend him or banks won't lend him? Has he tried mortgage broker?

I think it all comes down to numbers, how much is the house worth? How much of it is paid already? If let's say 30% is already paid off and you agree to decent conditions - if he stops paying for 6 months you'll be entitled to sell it for whatever you want.. then the risk is quite low really. But that really depends on your relationship with him.

With the above I'm not sure about tax implications as it will be your second home, so higher mortgage, income taxes of any etc.

Also wouldn't be better for him to find something else - clean start? Stay with you for a year maybe, get decent earning records, save a lot and go back to house market?

John1125

Newbie_John said:

Bank won't lend him or banks won't lend him? Has he tried mortgage broker?

Hi - he's got a low rate with a high street bank that's due to expire.  He is looking into other lenders but rates would be much higher; especially as he didn't work for a period of time in last 2 years so I think they see that as a risk. 
His house is worth £400K and he needs a loan of cira £100K but he's late 50's so repayments quite high as over shorter repayment period.
That's also another issue - my wife doesn't want me/us on a mortgage in retirement / our sixties.  We can both retire at 60 on work pension and although we'll take an income drop our own mortgage is paid and our kids through uni so big expenses dealt with.  She doesn't want a potential mortgage commitment when we're retired /on pensions and reduced income. Especially if we could be held liable.
I do have a very good relationship with brother but since divorce and mental health crisis he's not as focused. Given his age and fact it's family home he wants to stay there - it means a lot to him; moving now could impact him a lot psychologically. Emotionally it's a difficult request though, as whilst I can get an agreement drawn up enforcing it on my only brother would be hard.  And if I don't I'm essentially paying his mortgage and financially my wife and own children lose out. The more I think about it the more I am inclined to suggest I can't take on such a commitment. 

RAS

What exactly is your brother asking? You to be joint mortagee but he pays the bills, or is he expecting you to contribute? Is the house really suitable for a single person, with or without a lodger or two? 

If you do consider it, make it plain that your involvement ends when the new fix does. He has to be in a position to take on the whole mortgage or sell.

Also that if he starts a new relationship, the deal ends. 

John1125

RAS said:

What exactly is your brother asking? You to be joint mortagee but he pays the bills, or is he expecting you to contribute? Is the house really suitable for a single person, with or without a lodger or two? 

Hi - exactly that: he says I'd be on mortgage in name only eg to get it through the bank and get lower interest rate.  I wouldn't contribute.  He may get lodgers in and sometimes his son comes home. Really just wants to stay as it's his family home. However, my worry is my liability if things go wrong as then I could become liable eg if he wasn't working/didn't have income etc. 

elsien

Not could become liable. Would become liable.
Could he not afford a mortgage on the higher interest rate? Obviously, he would prefer not to, but if it’s that or move then needs must. 

Flugelhorn

I suspect your wife is a wise woman and this may turn out to be one of those things that SLAGIATT -  I am afraid that if your brother just stopped working, had no money, but was resident and a joint owner then you would have to pay all the mortgage and find it very hard to get him out of the place.

He really needs to find somewhere smaller

sammyjammy

I would try and persuade brother to sell the property and buy something without a mortgage, he needs to look to future and a single man in his late 50s doesn't need a family home.  If you take out mortgage in your name with him its far from simple as you won't be living in the property and it just encourages him not to be independent.