Would this work?
Discussion
This is something completely theoretical at the moment but I wondered if it'd be a runner.
Essentially my uncle and his wife moved to France when they took early retirement a couple of years ago. They were able to do this without selling their house which has been let since they moved away. They now want to realise some cash from it and have put it on the market. It's been valued at £360k and unfortunately for them a few others in the street have recently come on to the market. Personally, given the size and value of the houses I don't think it'll sell quickly, especially with the competition.
Now we are also looking for a house in the area and have a budget of £250k, made up of 10% deposit and the rest a 90% mortgage.
Whilst I know you get share equity arrangements is there any way these two situations can be married up? For example if we offered to buy 70% of the house for £250k. How would a mortgage company act? I assume they wouldn't like it as they wouldn't be able to take sole possession of the house if we defaulted on the mortgage.
Has anyone done or seen anything similar?
Essentially my uncle and his wife moved to France when they took early retirement a couple of years ago. They were able to do this without selling their house which has been let since they moved away. They now want to realise some cash from it and have put it on the market. It's been valued at £360k and unfortunately for them a few others in the street have recently come on to the market. Personally, given the size and value of the houses I don't think it'll sell quickly, especially with the competition.
Now we are also looking for a house in the area and have a budget of £250k, made up of 10% deposit and the rest a 90% mortgage.
Whilst I know you get share equity arrangements is there any way these two situations can be married up? For example if we offered to buy 70% of the house for £250k. How would a mortgage company act? I assume they wouldn't like it as they wouldn't be able to take sole possession of the house if we defaulted on the mortgage.
Has anyone done or seen anything similar?
The bank always wants everyone on the hook, so you would all have to be joint owners and each individually liable for the mortgage. Probably doable with a specialist lender; kind of analogous to the 'Mum and Dad guarantee' mortgages. Your uncle and aunt would have to agree to trust you that you weren't going to walk away and stick them with 250k of debt of course.
Alternatively how about having them give you 70k. You then buy the property outright from them with a bigger deposit(and possibly better mortgage rates as a result). Entirely separately you might agree to give them 70k+some amount if you ever sell the house.
Alternatively how about having them give you 70k. You then buy the property outright from them with a bigger deposit(and possibly better mortgage rates as a result). Entirely separately you might agree to give them 70k+some amount if you ever sell the house.
Newc said:
The bank always wants everyone on the hook, so you would all have to be joint owners and each individually liable for the mortgage. Probably doable with a specialist lender; kind of analogous to the 'Mum and Dad guarantee' mortgages. Your uncle and aunt would have to agree to trust you that you weren't going to walk away and stick them with 250k of debt of course.
Alternatively how about having them give you 70k. You then buy the property outright from them with a bigger deposit(and possibly better mortgage rates as a result). Entirely separately you might agree to give them 70k+some amount if you ever sell the house.
Unfortunately the second part is not really an option as would cause uproar with my cousins and I don't think they would catch on to the separate agreement part however many times it was explained to them! Alternatively how about having them give you 70k. You then buy the property outright from them with a bigger deposit(and possibly better mortgage rates as a result). Entirely separately you might agree to give them 70k+some amount if you ever sell the house.
Sarnie said:
Why not purchase the property using a 95% mortgage? Naturally your income would need to be sufficient......
The problem with buying above £250k is the stamp duty thing. I like to keep a rainy day fund and losing at least an extra £5k out of that straight away (and giving it straight to the government) is not an option. Also 95% mortgages would come with high interest rates would they not? A £225k 90% mortgage would cost us £1,000-£1,100 per month (First direct, nationwide) which is affordable however a £340k 95% month would surely be at least £1,700-£1,800 per month.
mx stu said:
The problem with buying above £250k is the stamp duty thing. I like to keep a rainy day fund and losing at least an extra £5k out of that straight away (and giving it straight to the government) is not an option.
Also 95% mortgages would come with high interest rates would they not? A £225k 90% mortgage would cost us £1,000-£1,100 per month (First direct, nationwide) which is affordable however a £340k 95% month would surely be at least £1,700-£1,800 per month.
I'm not sure what you mean about "£5k extra stamp duty"?Also 95% mortgages would come with high interest rates would they not? A £225k 90% mortgage would cost us £1,000-£1,100 per month (First direct, nationwide) which is affordable however a £340k 95% month would surely be at least £1,700-£1,800 per month.
You currently have a £25k deposit plus the £2.5k SD you'll need = £27,500
At 95% your deposit would be £17,500 plus £10,500 SD = £28,000 therefore only a £500 difference.
Yes, 95% rates would be higher and of course you'd be borrowing more, so the payment would be higher. I was merely highlighting how it would be possible for you to purchase the property.
Sarnie said:
I'm not sure what you mean about "£5k extra stamp duty"?
You currently have a £25k deposit plus the £2.5k SD you'll need = £27,500
At 95% your deposit would be £17,500 plus £10,500 SD = £28,000 therefore only a £500 difference.
Yes, 95% rates would be higher and of course you'd be borrowing more, so the payment would be higher. I was merely highlighting how it would be possible for you to purchase the property.
£25k deposit plus £2.5k stamp duty = £27,500 of which £25k is equity in the houseYou currently have a £25k deposit plus the £2.5k SD you'll need = £27,500
At 95% your deposit would be £17,500 plus £10,500 SD = £28,000 therefore only a £500 difference.
Yes, 95% rates would be higher and of course you'd be borrowing more, so the payment would be higher. I was merely highlighting how it would be possible for you to purchase the property.
£17.5k deposit plus £10.5k stamp duty = £28,000 of which £17.5k is equity in the house.
You've spent more but when the dust settles you'll have less for your money. The only winner is the government for the extra stamp duty they've pocketed! The extra £5k thing is more borne out of buying a house for £250,000 versus £250,001 and the difference thereon.
Sorry don't get me wrong I appreciate you throwing suggestions around. Personally I'm not keen on taking out a 95% mortgage (obviously if we have a 5% drop in value we'll be at negative equity). I can just about sleep easy with a 90% mortgage!
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