Mortgage to build an extension - with a twist
Discussion
I own my house outright. 4 bed dormer bungalow worth around £280k. I use the 2 bedrooms in the roof for my business, so it's effectively only 2 bedrooms.
I live here alone, so it's fine for me. Spare bedroom for visitors.
Since getting divorced a few years ago, I've had a couple of lucky escapes where women I've dated and considered settling down with have turned out to be unsuitable life-partners. Could easily have lost half my house. Fortunately it never got to the stage of them moving in permanently. At 62, I can't be bothered with the drama., but I don't want to grow old alone.
That leaves either getting a female friend to house share, or family.
My younger sister and her (female) partner want to move back to the area with their 7 year old daughter in the next year or so, when the next youngest will have started university. They live in a housing association property and have no real savings - no chance of buying here, and no luck getting an exchange.
We all get on really well. They regularly stay here, and we go abroad together most years. We all feel that we could happily share a house, as long as we have our own spaces to retreat to.
I have no children, so the house will probably pass to my sister eventually.
That's the back story.
We want to build an extension to create a new lounge and dining/sunroom to replace the ageing 4mx3m conservatory. Extension would be 7.5m x 4m.
The existing lounge would be converted into a 3rd downstairs bedroom with en-suite for me.
Rather than charging my sister and her family "rent", I suggested that she could pay for the building works in exchange for a share of the property, then just pay for my food and the increase in bills over what I'm paying now.
The obvious way to raise the cash would be a mortgage, but in her name. Should be substantially less than £50k, over maybe 10 years. She is 41, and earns £25k. Her partner is self-employed - recent, so no accounts to show, but earning a fair amount as a plasterer (was full-time carer for the children previously). We can do a lot of the work ourselves, just need a builder to put up the shell and lay in the new drainage for the en-suite, plus a spark to do the electrics.
Are mortgage companies likely to want to get involved with this?
I don't think I would qualify for a repayment mortgage in my own name because of my age, and I don't want an equity release product after seeing what it cost my parents when mum had to sell up after dad died.
I live here alone, so it's fine for me. Spare bedroom for visitors.
Since getting divorced a few years ago, I've had a couple of lucky escapes where women I've dated and considered settling down with have turned out to be unsuitable life-partners. Could easily have lost half my house. Fortunately it never got to the stage of them moving in permanently. At 62, I can't be bothered with the drama., but I don't want to grow old alone.
That leaves either getting a female friend to house share, or family.
My younger sister and her (female) partner want to move back to the area with their 7 year old daughter in the next year or so, when the next youngest will have started university. They live in a housing association property and have no real savings - no chance of buying here, and no luck getting an exchange.
We all get on really well. They regularly stay here, and we go abroad together most years. We all feel that we could happily share a house, as long as we have our own spaces to retreat to.
I have no children, so the house will probably pass to my sister eventually.
That's the back story.
We want to build an extension to create a new lounge and dining/sunroom to replace the ageing 4mx3m conservatory. Extension would be 7.5m x 4m.
The existing lounge would be converted into a 3rd downstairs bedroom with en-suite for me.
Rather than charging my sister and her family "rent", I suggested that she could pay for the building works in exchange for a share of the property, then just pay for my food and the increase in bills over what I'm paying now.
The obvious way to raise the cash would be a mortgage, but in her name. Should be substantially less than £50k, over maybe 10 years. She is 41, and earns £25k. Her partner is self-employed - recent, so no accounts to show, but earning a fair amount as a plasterer (was full-time carer for the children previously). We can do a lot of the work ourselves, just need a builder to put up the shell and lay in the new drainage for the en-suite, plus a spark to do the electrics.
Are mortgage companies likely to want to get involved with this?
I don't think I would qualify for a repayment mortgage in my own name because of my age, and I don't want an equity release product after seeing what it cost my parents when mum had to sell up after dad died.
clockworks said:
No. Paid the mortgage off on my previous house, about 13 years ago. Upgraded to this one using savings.
You could use a mortgage then but if it was in her name she would need to be on the deeds and therefore have a share in the property. Whoever’s name it is in you would have to be able to show you had sufficient income for the length of the mortgage.clockworks said:
I own my house outright. 4 bed dormer bungalow worth around £280k. I use the 2 bedrooms in the roof for my business, so it's effectively only 2 bedrooms.
I live here alone, so it's fine for me. Spare bedroom for visitors.
Since getting divorced a few years ago, I've had a couple of lucky escapes where women I've dated and considered settling down with have turned out to be unsuitable life-partners. Could easily have lost half my house. Fortunately it never got to the stage of them moving in permanently. At 62, I can't be bothered with the drama., but I don't want to grow old alone.
That leaves either getting a female friend to house share, or family.
My younger sister and her (female) partner want to move back to the area with their 7 year old daughter in the next year or so, when the next youngest will have started university. They live in a housing association property and have no real savings - no chance of buying here, and no luck getting an exchange.
We all get on really well. They regularly stay here, and we go abroad together most years. We all feel that we could happily share a house, as long as we have our own spaces to retreat to.
I have no children, so the house will probably pass to my sister eventually.
That's the back story.
We want to build an extension to create a new lounge and dining/sunroom to replace the ageing 4mx3m conservatory. Extension would be 7.5m x 4m.
The existing lounge would be converted into a 3rd downstairs bedroom with en-suite for me.
Rather than charging my sister and her family "rent", I suggested that she could pay for the building works in exchange for a share of the property, then just pay for my food and the increase in bills over what I'm paying now.
The obvious way to raise the cash would be a mortgage, but in her name. Should be substantially less than £50k, over maybe 10 years. She is 41, and earns £25k. Her partner is self-employed - recent, so no accounts to show, but earning a fair amount as a plasterer (was full-time carer for the children previously). We can do a lot of the work ourselves, just need a builder to put up the shell and lay in the new drainage for the en-suite, plus a spark to do the electrics.
Are mortgage companies likely to want to get involved with this?
I don't think I would qualify for a repayment mortgage in my own name because of my age, and I don't want an equity release product after seeing what it cost my parents when mum had to sell up after dad died.
This is possible but;I live here alone, so it's fine for me. Spare bedroom for visitors.
Since getting divorced a few years ago, I've had a couple of lucky escapes where women I've dated and considered settling down with have turned out to be unsuitable life-partners. Could easily have lost half my house. Fortunately it never got to the stage of them moving in permanently. At 62, I can't be bothered with the drama., but I don't want to grow old alone.
That leaves either getting a female friend to house share, or family.
My younger sister and her (female) partner want to move back to the area with their 7 year old daughter in the next year or so, when the next youngest will have started university. They live in a housing association property and have no real savings - no chance of buying here, and no luck getting an exchange.
We all get on really well. They regularly stay here, and we go abroad together most years. We all feel that we could happily share a house, as long as we have our own spaces to retreat to.
I have no children, so the house will probably pass to my sister eventually.
That's the back story.
We want to build an extension to create a new lounge and dining/sunroom to replace the ageing 4mx3m conservatory. Extension would be 7.5m x 4m.
The existing lounge would be converted into a 3rd downstairs bedroom with en-suite for me.
Rather than charging my sister and her family "rent", I suggested that she could pay for the building works in exchange for a share of the property, then just pay for my food and the increase in bills over what I'm paying now.
The obvious way to raise the cash would be a mortgage, but in her name. Should be substantially less than £50k, over maybe 10 years. She is 41, and earns £25k. Her partner is self-employed - recent, so no accounts to show, but earning a fair amount as a plasterer (was full-time carer for the children previously). We can do a lot of the work ourselves, just need a builder to put up the shell and lay in the new drainage for the en-suite, plus a spark to do the electrics.
Are mortgage companies likely to want to get involved with this?
I don't think I would qualify for a repayment mortgage in my own name because of my age, and I don't want an equity release product after seeing what it cost my parents when mum had to sell up after dad died.
- She needs to be named as an owner of the property
- You would need to be named on the mortgage also
clockworks said:
It makes sense that my sister would have to legally own a share of the house, but what would it mean for me to be "named on the mortgage"?
Well everyone who owns a share of the house must be named on the mortgage and you would all be assessed for eligibility regardless of the fact that she would be paying it. You would have to show sufficient income until the end of the mortgage. So it can be done with my sister getting the mortgage, but I would have to sign, and be jointly liable for the debt?
I guess that makes sense, as the property would be at risk anyway if she defaults.
An unsecured loan might be the way forward in that case.
My income is easily enough to make the repayments, but my age would go against me. I'm not keen on getting into debt, being so close to potentially retiring.
Are there any equity release products that offer the option to repay in full by making regular repayments and don't charge stupidly high interest rates? The work would be completed before she moves in.
I guess that makes sense, as the property would be at risk anyway if she defaults.
An unsecured loan might be the way forward in that case.
My income is easily enough to make the repayments, but my age would go against me. I'm not keen on getting into debt, being so close to potentially retiring.
Are there any equity release products that offer the option to repay in full by making regular repayments and don't charge stupidly high interest rates? The work would be completed before she moves in.
You have three sensible options really -
Mortgage
Unsecured loan
Secured loan
Each has their pros and cons. Regardless of what you do you will need to add her to the deeds if she is taking a share in your house through the payment of that loan or mortgage.
The product you choose depends pretty much on amount required and length of loan. Anything less than 5 years means a mortgage isn’t appropriate.
Mortgage
Unsecured loan
Secured loan
Each has their pros and cons. Regardless of what you do you will need to add her to the deeds if she is taking a share in your house through the payment of that loan or mortgage.
The product you choose depends pretty much on amount required and length of loan. Anything less than 5 years means a mortgage isn’t appropriate.
Assuming I can borrow that much, a £25k loan from Tesco over 7 years is only 3.1% APR. My sister's contribution to the household bills would cover the repayments. I'm guessing that a personal unsecured loan on these terms wouldn't be any more expensive than a mortgage, possibly cheaper taking into account any application fees and legal costs?
I've actually got just about enough in the bank to repay the loan in full if things go pear-shaped, so I could use some savings and a smaller loan if necessary. I'm not keen on using my savings, as I like to keep enough in the bank to see me through to state pension age if I'm unable to work (state pension plus 2x DB company pensions will be plenty to live on when I get to 66).
I'm pretty sure that doing the work will increase the value of the house, especially since we can do the a lot of the work ourselves, so nothing to lose in the long term.
I've actually got just about enough in the bank to repay the loan in full if things go pear-shaped, so I could use some savings and a smaller loan if necessary. I'm not keen on using my savings, as I like to keep enough in the bank to see me through to state pension age if I'm unable to work (state pension plus 2x DB company pensions will be plenty to live on when I get to 66).
I'm pretty sure that doing the work will increase the value of the house, especially since we can do the a lot of the work ourselves, so nothing to lose in the long term.
I would suggest you are better off keeping it simple, you take the loan, you pay for the extension (on your property) and simply charge them the appropriate rent and with an appropriate tenants (lodgers?) agreement. Likely the appropriate rent would be far less than they would pay to get their own property.
Far less complicated if relationships go south for some reason, or they decide they can't/won't pay in future, however unlikely.
Far less complicated if relationships go south for some reason, or they decide they can't/won't pay in future, however unlikely.
Yes, would definitely be simpler to go with a personal loan in my name.
I was trying to find a way of giving my sister and her family security and a stake in the property in return for a smallish investment, as well as getting a long-term commitment from her. Might be easier to just draw up an agreement for rent, and sort out my will leaving her the property assuming she cares for me when I need it rather than putting me in a home. I have a brother and sister a similar age to me, but they don't need the money. I have another younger sister too, so I would leave her my other assets.
There's also our 82 year old mum to consider. She owns an apartment in a retirement complex and is currently OK with just a cleaner once a week. None of us want her to go into a care home when the time comes (our aunt is in a good one, and I wouldn't wish it on anyone), so she will probably move in with us at some point. My house, once extended, will be fine for all of us. Between us, we will be able to care for mum. Couldn't do that on our own.
I was trying to find a way of giving my sister and her family security and a stake in the property in return for a smallish investment, as well as getting a long-term commitment from her. Might be easier to just draw up an agreement for rent, and sort out my will leaving her the property assuming she cares for me when I need it rather than putting me in a home. I have a brother and sister a similar age to me, but they don't need the money. I have another younger sister too, so I would leave her my other assets.
There's also our 82 year old mum to consider. She owns an apartment in a retirement complex and is currently OK with just a cleaner once a week. None of us want her to go into a care home when the time comes (our aunt is in a good one, and I wouldn't wish it on anyone), so she will probably move in with us at some point. My house, once extended, will be fine for all of us. Between us, we will be able to care for mum. Couldn't do that on our own.
An update on this:
My sister's partner has been working alongside a general builder for the past few months, learning about groundworks, block-laying, fitting doors & windows, kitchens, tiling, etc, while she teaches him to plaster and render. I've seen what she can do, and she's pretty good at everything except roofing - the builder she works with gets a chap in for that.
So, she is confident that she can do most of the extension build herself (with me and my sister doing some labouring), which reduces the outlay considerably. My savings should cover all the materials for the extension, en-suite conversion, and some hard landscaping. We'll just have to pay an architect to draw up the plans, a roofer, and a plumber and sparks to connect everything up to spec. Shouldn't need to borrow much, if anything.
The plan is for them to move in at the end of the next school year, so that their daughter does her final year of primary school here - make some new friends before going up to "big school".
This just leaves the legal side of things, and protecting both parties incase anything goes wrong:
She would pay rent, to cover my outlay on the works required over, say, 5 years, on top of her share of the bills.
Sister would go on the house deeds as owning 20% of the house (is it possible to share ownership in this way?), and I would make a will leaving my remaining share to her on condition that she doesn't pack me off to a care home.
My other younger sister would be left all my other assets (cash, cars, valuables/collectibles, etc.)
This would protect my sister's investment.
To protect me if we fall out or something, I wonder if it would be possible for mum to change her will, so that my sister's share would come to me to cover my initial outlay, with her getting the remainder of her "full" share?
We are just trying to cover every eventuality. We've never fallen out, but who knows what might happen in the future.
One last thing - if I absolutely did have to go into a care home for medical reasons, how would my sister owning 20% of the house affect care home funding, and the local authority's claim on the property to cover the bills?
My sister's partner has been working alongside a general builder for the past few months, learning about groundworks, block-laying, fitting doors & windows, kitchens, tiling, etc, while she teaches him to plaster and render. I've seen what she can do, and she's pretty good at everything except roofing - the builder she works with gets a chap in for that.
So, she is confident that she can do most of the extension build herself (with me and my sister doing some labouring), which reduces the outlay considerably. My savings should cover all the materials for the extension, en-suite conversion, and some hard landscaping. We'll just have to pay an architect to draw up the plans, a roofer, and a plumber and sparks to connect everything up to spec. Shouldn't need to borrow much, if anything.
The plan is for them to move in at the end of the next school year, so that their daughter does her final year of primary school here - make some new friends before going up to "big school".
This just leaves the legal side of things, and protecting both parties incase anything goes wrong:
She would pay rent, to cover my outlay on the works required over, say, 5 years, on top of her share of the bills.
Sister would go on the house deeds as owning 20% of the house (is it possible to share ownership in this way?), and I would make a will leaving my remaining share to her on condition that she doesn't pack me off to a care home.
My other younger sister would be left all my other assets (cash, cars, valuables/collectibles, etc.)
This would protect my sister's investment.
To protect me if we fall out or something, I wonder if it would be possible for mum to change her will, so that my sister's share would come to me to cover my initial outlay, with her getting the remainder of her "full" share?
We are just trying to cover every eventuality. We've never fallen out, but who knows what might happen in the future.
One last thing - if I absolutely did have to go into a care home for medical reasons, how would my sister owning 20% of the house affect care home funding, and the local authority's claim on the property to cover the bills?
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