Taking over a £750K house for £60k - whats the catch??
Discussion
I’m looking for a little advice here with taking over a house from my brother-in-law.
He has a number of houses he rents out and is looking to sell off all of them to pay off his mortgage. He has sold all but one which is struggling to sell due to location/ price.
The house in question is a 5 bed detached with 2 acres in North Essex. It’s worth circa £750K on the open market and was looking to sell via a ‘we buy any house’ company for a price circa £100k below this. The offer they made him meant he would walk away with £60k which he was happy to do just to get rid of it.
Here comes the offer he made me at the weekend.
If I were to sell my house I’d earn circa £70k cash, I’d give him the £60k cash and then move into the £750k house continue to pay his mortgage repayments each month. We have agreed that when we come to sell the house, all the profits would come to me and my wife. The mortgage is only interest only at the moment but in a few years we would revert to a repayment.
I’m lucky to be in this position and have the chance to live in what I’d deem the house of my dreams. I fully appreciate there are risks here but am I missing something oblivious??
Also I appreciate some sort of contract would need to drawn up between myself and my brother-in-law to define the T&C’s.
He has a number of houses he rents out and is looking to sell off all of them to pay off his mortgage. He has sold all but one which is struggling to sell due to location/ price.
The house in question is a 5 bed detached with 2 acres in North Essex. It’s worth circa £750K on the open market and was looking to sell via a ‘we buy any house’ company for a price circa £100k below this. The offer they made him meant he would walk away with £60k which he was happy to do just to get rid of it.
Here comes the offer he made me at the weekend.
If I were to sell my house I’d earn circa £70k cash, I’d give him the £60k cash and then move into the £750k house continue to pay his mortgage repayments each month. We have agreed that when we come to sell the house, all the profits would come to me and my wife. The mortgage is only interest only at the moment but in a few years we would revert to a repayment.
I’m lucky to be in this position and have the chance to live in what I’d deem the house of my dreams. I fully appreciate there are risks here but am I missing something oblivious??
Also I appreciate some sort of contract would need to drawn up between myself and my brother-in-law to define the T&C’s.
deanogtv said:
I’m looking for a little advice here with taking over a house from my brother-in-law.
He has a number of houses he rents out and is looking to sell off all of them to pay off his mortgage. He has sold all but one which is struggling to sell due to location/ price.
The house in question is a 5 bed detached with 2 acres in North Essex. It’s worth circa £750K on the open market and was looking to sell via a ‘we buy any house’ company for a price circa £100k below this. The offer they made him meant he would walk away with £60k which he was happy to do just to get rid of it.
Here comes the offer he made me at the weekend.
If I were to sell my house I’d earn circa £70k cash, I’d give him the £60k cash and then move into the £750k house continue to pay his mortgage repayments each month. We have agreed that when we come to sell the house, all the profits would come to me and my wife. The mortgage is only interest only at the moment but in a few years we would revert to a repayment.
I’m lucky to be in this position and have the chance to live in what I’d deem the house of my dreams. I fully appreciate there are risks here but am I missing something oblivious??
Also I appreciate some sort of contract would need to drawn up between myself and my brother-in-law to define the T&C’s.
You may have an issue with Stamp duty..... He has a number of houses he rents out and is looking to sell off all of them to pay off his mortgage. He has sold all but one which is struggling to sell due to location/ price.
The house in question is a 5 bed detached with 2 acres in North Essex. It’s worth circa £750K on the open market and was looking to sell via a ‘we buy any house’ company for a price circa £100k below this. The offer they made him meant he would walk away with £60k which he was happy to do just to get rid of it.
Here comes the offer he made me at the weekend.
If I were to sell my house I’d earn circa £70k cash, I’d give him the £60k cash and then move into the £750k house continue to pay his mortgage repayments each month. We have agreed that when we come to sell the house, all the profits would come to me and my wife. The mortgage is only interest only at the moment but in a few years we would revert to a repayment.
I’m lucky to be in this position and have the chance to live in what I’d deem the house of my dreams. I fully appreciate there are risks here but am I missing something oblivious??
Also I appreciate some sort of contract would need to drawn up between myself and my brother-in-law to define the T&C’s.
So, for clarification...
The mortgage would remain in his name, but you'd just take over the payments?
The obvious questions I'd be asking (if I was you or your brother) are:
What happens if you can't pay? Who does the bank chase and what happens to your 60k?
You say your brother needs the cash to pay his own mortgage, so what happen if things get tight for him and he can't? If 'your' house is still in his name, what happens if you fall out? Can you get a written agreement to outline the arrangement and that your brother is not entitled to any profits from the sale of the house? The last thing you want is to give him the cash upfront, pay his mortgage payments for him, and then watch him walk away with the profits.
The mortgage would remain in his name, but you'd just take over the payments?
The obvious questions I'd be asking (if I was you or your brother) are:
What happens if you can't pay? Who does the bank chase and what happens to your 60k?
You say your brother needs the cash to pay his own mortgage, so what happen if things get tight for him and he can't? If 'your' house is still in his name, what happens if you fall out? Can you get a written agreement to outline the arrangement and that your brother is not entitled to any profits from the sale of the house? The last thing you want is to give him the cash upfront, pay his mortgage payments for him, and then watch him walk away with the profits.
IANAL or a mortgage specialist but I can only imagine that if the mortgage company found out they would foreclose pretty rapidly.
Your brother-in-law and you would be defrauding them.
I seriously doubt any legit lawyer would write up a contract between you two that effectively gave all the ownership rights to you without pointing out you need to tell the mortgage company.
And clearly if you could get proper approval to take on such a mortgage then you would do so.
That's the point.
Your brother-in-law and you would be defrauding them.
I seriously doubt any legit lawyer would write up a contract between you two that effectively gave all the ownership rights to you without pointing out you need to tell the mortgage company.
And clearly if you could get proper approval to take on such a mortgage then you would do so.
That's the point.
So, basically, your brother-in-law has invited you to pay him £60k not to sell his house so he can rent it to you instead with the feeble incentive that any equity it gains after you start paying HIS mortgage, is yours. Bear in mind that interest rates are at an unsustainable low, can't remain there forever, and when they eventually go up, which they will, housing will become less affordable and prices will have to fall to compensate for the higher cost of mortgages. You could easily end up without your £60k and still be without any bricks and mortar of your own.
Things like this are not uncommon, assuming you cannot raise mortgage to buy...
Could transfer existing mortgage to a limited company, you and your brother in law being directors.
A proper accountant is needed... Then play the game from there. Even if you phoned hmrc they would know the exact answer to this
Off shore management companies etc etc it all goes on.
Seems a little bit too convenient to me that he is willing to drop price £100k they have probably offered him even less.
Could transfer existing mortgage to a limited company, you and your brother in law being directors.
A proper accountant is needed... Then play the game from there. Even if you phoned hmrc they would know the exact answer to this
Off shore management companies etc etc it all goes on.
Seems a little bit too convenient to me that he is willing to drop price £100k they have probably offered him even less.
deanogtv said:
The mortgage is only interest only at the moment but in a few years we would revert to a repayment.
Apart from the myriad of other issues, what value of the house is mortgaged, and over what period is the repayment expected?Presuemably it's several hundred £K, so while the IO amount might look "cheap", the repayment amounts will be pretty immense.
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