Mortgage and cohabitation
Discussion
I am buying a new place with my girlfriend.
She is providing £100k towards the deposit, I am providing £225k and I am planning a mortgage of £475k as a sole borrower and I will be responsible for all payments.
We will enter a cohabitation agreement showing the property owed as tennants in common, her share 1/8, mine 7/8.
Any problems to foresee? Are the mortgage lenders likely to be happy? Is it an A2?
She is providing £100k towards the deposit, I am providing £225k and I am planning a mortgage of £475k as a sole borrower and I will be responsible for all payments.
We will enter a cohabitation agreement showing the property owed as tennants in common, her share 1/8, mine 7/8.
Any problems to foresee? Are the mortgage lenders likely to be happy? Is it an A2?
Eric Mc said:
1/8 doesn't reflect her capital contribution.
In what way? £800k property, she puts in £100k.I'm not sure how the cohabitation agreement will work, though. You can't be tenants in common if the property isn't jointly owned. Need to have some sort of declaration of trust, but she's not properly protected unless she's on the Land Registry title. But if she's not on the mortgage (and if she were, she'd be jointly and severally liable for it), she can't be on the title.
So, not straightforward and whatever is accepted by the mortgagee, she'll need independent legal advice.
Jobbo said:
Eric Mc said:
1/8 doesn't reflect her capital contribution.
In what way? £800k property, she puts in £100k.I'm not sure how the cohabitation agreement will work, though. You can't be tenants in common if the property isn't jointly owned. Need to have some sort of declaration of trust, but she's not properly protected unless she's on the Land Registry title. But if she's not on the mortgage (and if she were, she'd be jointly and severally liable for it), she can't be on the title.
So, not straightforward and whatever is accepted by the mortgagee, she'll need independent legal advice.
Eric Mc said:
I was thinking of the deposits that were mentioned. The full ratio of 8 to 1 only works out over the life of the mortgage. What happens if things go bad in the first few months or the very early years of the set up?
But he's taking responsibility for the entire mortgage (in his sole name, he's paying all of it). If the property is sold for a loss at £600k, she would expect to get 1/8th of that back, i.e. £75,000, and he'd get the balance after redeeming the mortgage (£50k). Conversely, if it goes up in value to £1m and is sold, she'd get £125,000 back and he'd get £400k. Greater risk and greater reward.
Jonathan27 said:
They did for me.
There's always one! ha.Naturally I can't cover every single permutation, but in general, most lenders will not entertain an element of deposit to be from someone who will live at the property but not be on the mortgage, as that person could try to claim rights to the property based on their contribution to the deposit. Lenders always think in terms of repossession which could get messy if they have a sitting tenant refusing to leave who is claiming a legal right over the property but is not liable for any of the debt....
I think the main element of risk is living with a misanthropic curmudgeon (that is me by the way).
I think the house is fairly priced (but will try to get it for less, of course), having looked for a year and lived in the area for 10, but we will see if it comes up to valuation and what the survey shows up.
Kam
I think the house is fairly priced (but will try to get it for less, of course), having looked for a year and lived in the area for 10, but we will see if it comes up to valuation and what the survey shows up.
Kam
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