Parents Lending money to Children for mortgage - Declaration of Trust / Second Charge

clutton_2

i dont think that there is enough trust in this relationship for you to be considering committing two of you to a mortgage which is higher than your current outgoings, and in which you are reluctant to accept a second charge (which is a very normal way to provide collateral for a loan).

i would think long and hard about all this- and rent for a while and see how things are in the relationship first.

This £16k is a worry for you now - that worry will only grow and grow if the relationship starts to founder

you may want to read this thread on the difficulties of mortgaging with borrowed money in the current credit crunch - the author of this thread has been a broker for many many years

http://www.singingpig.co.uk/forums/thread/516506.aspx

kn0bby

Yes, i'd agree one expensive dog!

I understand people may think we are doing the wrong thing, but it is both what we want and we feel a are ready.

The option of staying in my flat isnt really an option as my current mortgage is up for renewal in feb 09, it then changes to a varible rate that might not be affordable on my own. At this time i might also struggle to find a mortgage company to lend me the required amount as my property might not be the 162k, this is another worry for me. Do i sell now and cut my losses or do I wait and it may then get worse.

The new mortgage is affordable, it works out cheaper for me as we are both contributing towards it. The only reason we are having to borrow the 10k is because of the negative equity in my current property.

Going from a property if 150 to 195 i dont think is huge jump, Its a 2 bed flat to a 3 bedroom house. We are buying a property that requires work and it is very cheap. We have reseached house prices in the same road and no other house in the street has sold for less that 250k in the last 6 years.

We are unable to port the NR mortgage across to the new property as NR do not offer a 95% mortgage, and because of our changed criteria NR will not help.

Our view is if we can get into a property and fix for 5 years we should be able to ride out this property price crash and things should start to sort themselves out by them. The house we are buying needs alot of work so we should have room to make money on it as long as the property prices dont crash huge by huge amounts.

As mentioned above my sister has just been through a bad break up and my girlfriend and i want to protect ourselves should anything happen in the future. We don't feel it will happen and hate talking about it but her parents were the ones who wanted this to be covered as part of lending their money.

devils_advocate

You own your place, but you're not allowed dogs? Solve this, as your first problem, and the rest of the problems disappear.

Don't overcomplicate things. If you do, you're increasing the !!!!!!ation factor, and I can safely predict that whatever happens, it won't be to your advantage, and it will be very expensive to you.

clutton_2

"" Going from a property if 150 to 195 i dont think is huge jump"" - its 33% !!!!!

"" my girlfriends parents will be paid the 10k if the house is sold, or if we split up.""

if you split up and one of you moves out and the house is not sold how will the parents get their £10k back ? From their point of view there is no way i would lend £10k without a charge on the property - a Charge is their guarantee of getting their money back - AS LONG AS property prices go up - they are taking a risk on you and your relationship with their daughter and understandably want some guarantees.

Your view of losing your own £16k is a bit odd - you cannot blame your girl-friend for the negative equity you are in - you have lost this money due to the housing market - nothing to do with her - so why should she repay you £16k which was lost by you before you moved in with her ?


""the house we are buying needs alot of work"" -

so you are moving into a new home 33% more expensive than your old one (with more mortgage presumably) into a property requiring goodness knows how much money to be spent on it - .... sounds like you may be seriously overstretching yourself financially to me

did you look at how lenders are viewing "borrowed" deposits at present ?

(just playing devils advocate here ....)

a lot of issues here

dont rush it

kn0bby

Yes i live in a flat on the 3rd floor the lease states i am not allowed pets. not alot i can do about that. My girlfriend wont get rid of the dog and i respect that, it plays a big part in our lives already (walks, days out etc) and i wouldnt want to change that.

Forgot to mention.. My NR mortgage is 130k with 30k secured loan bolted on top. When I purchased the property the property prices were increasing and i planned to make money on the property and pay off my uni debt. I paid 145k for my property in the first place so i have made money just the debt hasnt disappeared.

clutton_2

""I paid 145k for my property in the first place so i have made money just the debt hasnt disappeared.""

""we have just sold for 153k, my mortgage is for 162k with NR""

i have no idea how you arrive at "i have made money"

kn0bby

clutton wrote: »

"" Going from a property if 150 to 195 i dont think is huge jump"" - its 33% !!!!!

"" my girlfriends parents will be paid the 10k if the house is sold, or if we split up.""

if you split up and one of you moves out and the house is not sold how will the parents get their £10k back ? From their point of view there is no way i would lend £10k without a charge on the property - a Charge is their guarantee of getting their money back - AS LONG AS property prices go up - they are taking a risk on you and your relationship with their daughter and understandably want some guarantees.

Your view of losing your own £16k is a bit odd - you cannot blame your girl-friend for the negative equity you are in - you have lost this money due to the housing market - nothing to do with her - so why should she repay you £16k which was lost by you before you moved in with her ?

(just playing devils advocate here ....)

a lot of issues here

dont rush it

the negative equity part we have talked about. i understand i am bringing a loss, but i am only selling so we can be together, she could come and live with me but wont because of the dog. So between us we have decided we would share the negative equity.

i think the second charge came as a bit of a shock as we are all quite close and my girlfriend and i felt a little untrusted. I understand why a second charge might be needed but it wont be able to be put in place until we have completed as the mortgage company wont allow it.

kn0bby

clutton wrote: »

so you owe £160k ...... how much rent will you get for your flat ?

""I paid 145k for my property in the first place so i have made money just the debt hasnt disappeared.""

i have no idea how you arrive at "i have made money"

I paid 145k for my property and sold for 153k, thats an 8k profit, if you take my 30k loan as seperate.

I think my flat would rent out for 600-700 a month.. we have already done down this route, if we look to buy another property mortgage company wont lend enough to buy a place. I am a little uneasy about the fact if my tenants move out i am left to pay two mortgages. yes we could rent out mine and then rent out a house but i am still left with the fact my property might not be worth enough in the new year and i will struggle to get a new mortgage.

looby-loo_2

When I bought with my OH he put in £12,000 towards a £36,000 bed house (It was a while ago) I don't think it even occured to either of us what would happen if we split. I bought furnishing as and when we did each room.

How times have changed. Would he still be entitled to 1/3 of the sale value before the gain is split 50/50? What a nightmare to work it out.

kn0bby

looby-loo wrote: »

When I bought with my OH he put in £12,000 towards a £36,000 bed house (It was a while ago) I don't think it even occured to either of us what would happen if we split. I bought furnishing as and when we did each room.

How times have changed. Would he still be entitled to 1/3 of the sale value before the gain is split 50/50? What a nightmare to work it out.

It is a nightmare to think about.. its taken all the excitement out of it for us. Its mainly presure from my GF parents to do it. I know all this wasted emtion and effort will be a waste of time cos we will never need it and i know we will grow old together..