Buying a family members house before it's repossessed.
Discussion
Afternoon all
I need some advice as to what to do about buying a property from a family member before it's repossessed.
Is this at all possible? There's roughly 100k left to pay on a 250k valued property, but this family member has hit financial difficulties and has fallen a fair bit behind on payments (believed at the moment to be near on 10k!), so I'd like to buy the property from them. Can I do this once when the mortgage company are seeking to repossess the property? Could I get another mortgage for this property whilst I already have one? The mortgage is too much for them to cope with after a couple of re-mortgages (if that's what they're called) in the past, before this particular recession. My idea is to get a mortgage on what's owed, which hopefully will reduce the monthly repayments, and theoretically rent the property to them.
I can just imagine it's not as simple as this, but if anyone can offer any advice, or points I've missed, I'd be very appreciative.
Thanks in advance
Dean
I need some advice as to what to do about buying a property from a family member before it's repossessed.
Is this at all possible? There's roughly 100k left to pay on a 250k valued property, but this family member has hit financial difficulties and has fallen a fair bit behind on payments (believed at the moment to be near on 10k!), so I'd like to buy the property from them. Can I do this once when the mortgage company are seeking to repossess the property? Could I get another mortgage for this property whilst I already have one? The mortgage is too much for them to cope with after a couple of re-mortgages (if that's what they're called) in the past, before this particular recession. My idea is to get a mortgage on what's owed, which hopefully will reduce the monthly repayments, and theoretically rent the property to them.
I can just imagine it's not as simple as this, but if anyone can offer any advice, or points I've missed, I'd be very appreciative.
Thanks in advance
Dean
I'm sure it will be possible, all the mortgage company will care bout is getting their loan repaid.
However, presuming its valued properly at £250k what makes you think that the occupier will pay you a proper market rent (if that's what you want) when they didn't pay their mortgage on what was a comparatively low LTV?
Edit for more questions:\
What are you planning to buy it at? £100k? £250k? Some other figure in between and get yourself a bargain?
However, presuming its valued properly at £250k what makes you think that the occupier will pay you a proper market rent (if that's what you want) when they didn't pay their mortgage on what was a comparatively low LTV?
Edit for more questions:\
What are you planning to buy it at? £100k? £250k? Some other figure in between and get yourself a bargain?
Thanks for the reply mate
The rent and associated bills will be covered. We only want the mortgage repayments covered by the rent, which, if I'm not missing something major, should be smaller on a much better rate than it is on now. If needs be, I'll help with the mortgage repayments with a small amount. This is a family member who has been affected by this recession after all.
I'm only a modest earner (50k before tax), but am I right in thinking 100k mortgage on a 250k property will get me a favourable 40% LTV rate?
I do. Urgently have my own mortgage, but don't have much equity from the property at all
ETA, I'd be buying at pretty much what's left of the mortgage.
The rent and associated bills will be covered. We only want the mortgage repayments covered by the rent, which, if I'm not missing something major, should be smaller on a much better rate than it is on now. If needs be, I'll help with the mortgage repayments with a small amount. This is a family member who has been affected by this recession after all.
I'm only a modest earner (50k before tax), but am I right in thinking 100k mortgage on a 250k property will get me a favourable 40% LTV rate?
I do. Urgently have my own mortgage, but don't have much equity from the property at all
ETA, I'd be buying at pretty much what's left of the mortgage.
So long as the sale will realise enough cash to pay off the mortgage amount, any overdue payments and interest accrued, legal costs etc, then I can't see any fundamental problems with what you're suggesting. It sounds as though there is a fair amount of equity in the house, why didn't they put it on the market before they got into this state?
As to whether you'd be able to get a mortgage, that depends on your circumstances, and how much cash you've got available, as the mortgage will obviously have to be a BTL mortgage, which require larger deposits.
As to whether it's the right thing to do, well, let's just say, i'd think very carefully about it before doing it. If they can't afford the mortgage, will they be able to afford the rent? It's difficult enough dealing with BTL tenants who don't pay or don't look after the place, let alone family... My wife rented her old flat to her brother and it nearly destroyed their relationship.
Obviously you'll have to declare the income to HMRC and do all the usual landlord things like have insurance, register the deposit properly and do annual gas safety checks etc.
As to whether you'd be able to get a mortgage, that depends on your circumstances, and how much cash you've got available, as the mortgage will obviously have to be a BTL mortgage, which require larger deposits.
As to whether it's the right thing to do, well, let's just say, i'd think very carefully about it before doing it. If they can't afford the mortgage, will they be able to afford the rent? It's difficult enough dealing with BTL tenants who don't pay or don't look after the place, let alone family... My wife rented her old flat to her brother and it nearly destroyed their relationship.
Obviously you'll have to declare the income to HMRC and do all the usual landlord things like have insurance, register the deposit properly and do annual gas safety checks etc.
DeanR32 said:
Thanks for the reply mate
The rent and associated bills will be covered. We only want the mortgage repayments covered by the rent, which, if I'm not missing something major, should be smaller on a much better rate than it is on now. If needs be, I'll help with the mortgage repayments with a small amount. This is a family member who has been affected by this recession after all.
I'm only a modest earner (50k before tax), but am I right in thinking 100k mortgage on a 250k property will get me a favourable 40% LTV rate?
I do. Urgently have my own mortgage, but don't have much equity from the property at all
ETA, I'd be buying at pretty much what's left of the mortgage.
If you don't mind me asking, where is the rest of the money coming from for buying the house? Forgive me if i'm wrong, but it sounds to me like you're planning to use their equity to buy the non mortgaged part of the house, i'm struggling to understand how that will work, as they'd have to effectively gift you that money. The rent and associated bills will be covered. We only want the mortgage repayments covered by the rent, which, if I'm not missing something major, should be smaller on a much better rate than it is on now. If needs be, I'll help with the mortgage repayments with a small amount. This is a family member who has been affected by this recession after all.
I'm only a modest earner (50k before tax), but am I right in thinking 100k mortgage on a 250k property will get me a favourable 40% LTV rate?
I do. Urgently have my own mortgage, but don't have much equity from the property at all
ETA, I'd be buying at pretty much what's left of the mortgage.
I may as well say, the house will eventually be mine anyway, as it's my parents in bother. I don't want them to lose what they've grafted for all their lives to lose it all.
I don't want to be making anything from this regarding rent etc. Maybe I'm way off, but any mortgage I'd be able to get (if it's possible) would be at a far better rate than my parents who have got in all sorts of trouble financially. This, for me is nothing to do with gain and everything to do with saving my parents from losing the house.
I don't want to be making anything from this regarding rent etc. Maybe I'm way off, but any mortgage I'd be able to get (if it's possible) would be at a far better rate than my parents who have got in all sorts of trouble financially. This, for me is nothing to do with gain and everything to do with saving my parents from losing the house.
Dean, I asked Sarnie for some advice on a similar thing last year.
IIRC it's a bit awkward when it's your own family living in the house and planning on renting it off you. Do you have your own mortgage at the moment? That was something I was told would be required, I couldn't buy the house and allow family to continue living in it.
Good luck sorting it, I need to get this sorted for my gran soon and it's going to be hard work I know.
IIRC it's a bit awkward when it's your own family living in the house and planning on renting it off you. Do you have your own mortgage at the moment? That was something I was told would be required, I couldn't buy the house and allow family to continue living in it.
Good luck sorting it, I need to get this sorted for my gran soon and it's going to be hard work I know.
In these sort of circumstances you sometimes need to ignore the otherwise sensible advice you'll get, and do what is right for your family.
You do need to think through the impacts this might have on you though, if times got tough (say you lost your job), would you be able to continue subsidising the mortgage?
You do need to think through the impacts this might have on you though, if times got tough (say you lost your job), would you be able to continue subsidising the mortgage?
DeanR32 said:
I may as well say, the house will eventually be mine anyway, as it's my parents in bother. I don't want them to lose what they've grafted for all their lives to lose it all.
I don't want to be making anything from this regarding rent etc. Maybe I'm way off, but any mortgage I'd be able to get (if it's possible) would be at a far better rate than my parents who have got in all sorts of trouble financially. This, for me is nothing to do with gain and everything to do with saving my parents from losing the house.
I don't want to be making anything from this regarding rent etc. Maybe I'm way off, but any mortgage I'd be able to get (if it's possible) would be at a far better rate than my parents who have got in all sorts of trouble financially. This, for me is nothing to do with gain and everything to do with saving my parents from losing the house.
longshot said:
DeanR32 said:
I may as well say, the house will eventually be mine anyway, as it's my parents in bother. I don't want them to lose what they've grafted for all their lives to lose it all.
I don't want to be making anything from this regarding rent etc. Maybe I'm way off, but any mortgage I'd be able to get (if it's possible) would be at a far better rate than my parents who have got in all sorts of trouble financially. This, for me is nothing to do with gain and everything to do with saving my parents from losing the house.
I don't want to be making anything from this regarding rent etc. Maybe I'm way off, but any mortgage I'd be able to get (if it's possible) would be at a far better rate than my parents who have got in all sorts of trouble financially. This, for me is nothing to do with gain and everything to do with saving my parents from losing the house.
Also, instead of making it complicated, can you not just pay them, then they pay the mortgage?
Inkyfingers said:
In these sort of circumstances you sometimes need to ignore the otherwise sensible advice you'll get, and do what is right for your family.
And commit fraud?!!?- BTL lending is almost as tight as residential lending these days
- Most lenders want you to own your own home already, if not another BTL already
- Most now want minimum incomes of £25k too
- BTL mortgages are unregulated as technically they are classed as investments, renting to family makes them regulated BTL's which is a big no no for BTL lenders.
- You could buy it as a residential property for a dependent other, but your income would need to cover ALL mortgage debts and running costs for both houses. Given that the most you can lend is 5x income, at £50k you could borrow £250k in total so to borrow £100k for this, your mortgage would need to be well under £150k to stand a chance.
- You would have to buy it at full market value, with your parents gifting you the equity
- Expect big problems when you it's revealed that the vendor is the one gifting the equity and will be remaining in the property (google "sale & rent back schemes") at no point would there be vacant possession either......
I wouldn't say it's impossible, but not far off...........
Cheers Butter Face.
If there's another way to do it, then we'll take that option. It seems that they'll be on the same b
d rate that they struggle to afford. I'd like them to be able to move the mortgage to a better rate, but I very much doubt they'd be able to do this.
I'll be seeing them Monday again so we'll explore all avenues suggested
Thanks for your replies
If there's another way to do it, then we'll take that option. It seems that they'll be on the same b
d rate that they struggle to afford. I'd like them to be able to move the mortgage to a better rate, but I very much doubt they'd be able to do this. I'll be seeing them Monday again so we'll explore all avenues suggested
Thanks for your replies
Sarnie said:
And commit fraud?!!?
Excuse me, but where on earth did I suggest that? What I meant, is that, as it's his parents, he may decide to ignore the advice about whether it's a sensible financial decision for him and do it simply to help them. If you looked at my earlier post, I mentioned some of his legal obligations, issues with BTL mortgages etc. I know there are issues with buying from relatives and leasing back, but this is not an area i've got any experience of, so wouldn't presume to advise.
Edited by anonymous-user on Saturday 2nd August 19:21
It's a provision to prevent Inheritance Tax (IHT) abuse.
So yes, a rent close to the "norm" for that area and that sized property would be expected.
You, of course, will need to return the rental income on a self assessment tax return too.
There is also a situation regarding elderly people dispensing their assets so that they could impoverish themselves to avail of council care.
With your parents being in such a poor financial situation, they may be impoverished already.
So yes, a rent close to the "norm" for that area and that sized property would be expected.
You, of course, will need to return the rental income on a self assessment tax return too.
There is also a situation regarding elderly people dispensing their assets so that they could impoverish themselves to avail of council care.
With your parents being in such a poor financial situation, they may be impoverished already.
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