Too early to buy?

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haventahybrid

Original Poster:

114 posts

80 months

Friday 21st July 2017
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Hi everyone.

Just looking for some opinions on what to do if anything at all.

I am contemplating my options so would appreciate some impartial PH advice as I know there are some very knowledgeable folk on here.

I am looking to move house to a bigger house than we currently have. Clearly not at the stage where I know how much said house will cost but lets say for the sake of argument circa £675000. This is roughly the price of a detached 4 bed in my area (Camberley, Fleet, Basingstoke).

Now, here is the the rub. Our current house has been valued at £390000 (3 bed semi) so a defecit of circa £285000. I do not have a mortgage on this BUT there is a declaration of trust associated to this house and both my wife and FIL are on the deeds. In fact, 80% of the house belongs to him and the declaration of trust in summary is me paying him via standing order for the remaining 20% over the course of a mortgage term; in this instance, 25 years.

We have a good relationship and the sum of money owed is only circa £70K and I know that the house is being left to us but when we moved from a 2 bed to a 3 bed we felt this was a good way to do it (he had the capital to make the difference in price and he owned 100% of our last house).

So the easiest option would be to carry on as is and obtain a mortgage for the £285000 (appreciate it may not be that simple but just being hypothetical) and carry on paying the standing order. The difference would be that he would then only own £312000 (% of equity would be dependant on price of home) of new home rather than 80% of old home (circa).

Other option would be give him more equity in new house if he was open to it and keep my monthly payments down. I should say that he owns his current house outright (value over 1.5 mil), has a number of passive incomes and both he and wife have pensions close to six figures per year.

I know he can probably afford it but I don't want to take the proverbial.

So to summarise 3 options:

1.) Go all out on my own and stretch myself very thin whilst interest rates are low for the next couple of years with first option above.
2.) Go cap in hand with the second option above.
3.) Do nothing and wait for 3 or so years until some assets have matured, my wages have (hopefully) risen and have more disposable income.

Apologies for the long post, thanks.


Hoofy

76,253 posts

281 months

Friday 21st July 2017
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Can you guarantee that the interest rates will not rise? If not, then what happens if it's now up to 1%? Will you be in a pickle?

haventahybrid

Original Poster:

114 posts

80 months

Friday 21st July 2017
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Hoofy said:
Can you guarantee that the interest rates will not rise? If not, then what happens if it's now up to 1%? Will you be in a pickle?
In short no, I cannot guarantee that. If I did take advantage now and get a fixed 3 year at a low interest rate then by the time that fixed rate elapsed and subject to higher rates, a number of other financial commitments I have will have been settled which could then be used as a buffer so I am protected in that sense i.e. no student loan which would take care of a 2% increase. Obviously I would like to think that my wages will have increased by that time but, also aware that with that so will my families expectation of quality of life.

haventahybrid

Original Poster:

114 posts

80 months

Friday 21st July 2017
quotequote all
DogRough said:
First thing that strikes me is that the lender on the new property would have to consent to the trust arrangement. I suspect that some would have concerns as it could cause potential issues on repo.

Assuming you find a lender who was happy with it, then from your FIL's point of view it would de-risk his current situation, so there wouldn't be a downside for him.
Raised a good point there that I had not thought of frown I am not sure that any lender would be happy with it! Declaration of trust aside, even if I were to take the hit of new house on my own. My FIL I suspect would want to be on the deeds and rightly so. This would then prevent me from getting any mortgage as the repayment term would have to be completed prior to his 70th birthday would it not? That would give me 6 years which is not a viable option. Only way around that would for him to raise the capital to buy the new place or for him to come off the deeds and keep the arrangement soley based around the declaration of trust which I would not feel comfortable asking him to do...

Maybe it is sit tight for a few years then!

megaphone

10,696 posts

250 months

Friday 21st July 2017
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Does your FIL have any other children? If not then it may well be time for him to start giving his assets away to his daughter and SIL. No point in waiting until he's on deaths door to start thinking about inheritance. Have chat to him and explain how you both will benefit from it now rather than in 10-20-30 years time.

Of course if he has other children then this can be more difficult, again it is better to deal with it now, when you all will benefit, rather than in years to come when you may not need the money.

haventahybrid

Original Poster:

114 posts

80 months

Friday 21st July 2017
quotequote all
megaphone said:
Does your FIL have any other children? If not then it may well be time for him to start giving his assets away to his daughter and SIL. No point in waiting until he's on deaths door to start thinking about inheritance. Have chat to him and explain how you both will benefit from it now rather than in 10-20-30 years time.

Of course if he has other children then this can be more difficult, again it is better to deal with it now, when you all will benefit, rather than in years to come when you may not need the money.
Hi megaphone!

Yes, he has two daughters. Both were bought a 2 bed house (under his name). This is the first house we had and subsequently moved to the three bed we now have.

I completely get your point and it makes logical sense to do so. Trouble is, as logical as I know it is its not something I really wish to bring up. Reason being, he has gone from finance director -- board director -- company secretary in a plc company; he knows the laws around inheritance, capital gains etc etc far better than I ever will. Point is there is a reason why he has not done this up until now, I do not think he needs me to tell him its the pragmatic thing to do. It is quite a frustrating situation....

superkartracer

8,959 posts

221 months

Friday 21st July 2017
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haventahybrid said:
80% of the house belongs to him
Buy your our house and make your life a lot simpler .

HTH .

haventahybrid

Original Poster:

114 posts

80 months

Friday 21st July 2017
quotequote all
superkartracer said:
haventahybrid said:
80% of the house belongs to him
Buy your our house and make your life a lot simpler .

HTH .
Hi,

Do you mean spend money buying more equity in current house of which FIL currently owns 80%? If so, does not make financial sense to me? The outcomes to that would be the following as I see them:

1.) Spend the money I would use for a new mortgage buying more equity in current house - Why not use that money maxing out ISA's, low risk bonds, increase Sharesave scheme etc. Would work harder for me short term and would be easily accessible if needed.
2.) The house is ours at a point in time so just seems illogical to "buy".
3.) FIL may think I am doing a decent, respectable thing paying off more of the house because I can afford it. Just as likely to think, that is not a very savvy thing to do and could in fact be counter productive for me in the long term if its deemed I am not astute with the best way to maximise myself and families position.

Again, appreciate everyones thoughts and I may well be missing something!


haventahybrid

Original Poster:

114 posts

80 months

Friday 21st July 2017
quotequote all
DogRough said:
I think the clue to the benefit of buying more equity is in your point 3.

Firstly, it would lessen you dependence on FIL, both financially and emotionally. I don't know how old you are, but perhaps it's not so great to be in a position where you are craving your FIL's approval?

Secondly, he may well respect your wish to take more ownership of your family's finances, and see it as a positive?
That's a fair point, he may well respect my wish to take more ownership of family finances. But to be clear, I am not wishing for his approval. My main aim is to maximise what I can get for my immediate family. With two children and a wife I would prefer it if possible that they were living in a larger house in a nicer area. If my priority was the former I would have no intention of doing this, I would just start to buy more equity in current house but this is not what I would like to do. Completely get that in doing so I would be in a better position come 2-3 years when I looked again at moving house. But in that time circumstances may change organically anyway.

I am in my latter twenties.

Thanks,

mcbook

1,384 posts

174 months

Friday 21st July 2017
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Maybe I've got this wrong but you're essentially saying that you need your FIL to lend/gift you a load more cash because you'd like a bigger house in a nicer area. Can I have another £300k please Daddy ;-)

Seems like that's the only way it'll really work as your complex current agreement probably won't be acceptable to lenders.

How much of a mortgage can you afford? Are you prepared to ask the FIL for cash on an informal basis i.e. no legal agreement? That seems like the only way you'll be able to add both amounts together to get the bigger house.

haventahybrid

Original Poster:

114 posts

80 months

Friday 21st July 2017
quotequote all
mcbook said:
Maybe I've got this wrong but you're essentially saying that you need your FIL to lend/gift you a load more cash because you'd like a bigger house in a nicer area. Can I have another £300k please Daddy ;-)

Seems like that's the only way it'll really work as your complex current agreement probably won't be acceptable to lenders.

How much of a mortgage can you afford? Are you prepared to ask the FIL for cash on an informal basis i.e. no legal agreement? That seems like the only way you'll be able to add both amounts together to get the bigger house.
After going back over this thread I think you are probably right wobble

I may just go for it!! Approach it at a slightly differently angle to the above i.e. ask him for the cash in exchange for the equity to the same ratio as is today. So we would keep the 80/20 split and I would make up the additional cost up with increased standing order. He might tell me to bugger off but God loves a trier smile

haventahybrid

Original Poster:

114 posts

80 months

Friday 21st July 2017
quotequote all
DogRough said:
You personal and family circumstances are none of my business, my concern however was around your statement that you were worried about your FIL thinking that perhaps your financial management was not "astute" enough, which could jeopardise your future relationship?

I appreciate you don't want to pee him off, but if it was me, I would politely tell him to take a hike if he took that sort of position.
Don't worry, I asked for your opinion and you can only go on what you have seen and what you infer from that. That is more aimed at what he may / may not leave me or gift me in the future for fear of recklessness. Nothing to do with our relationship, that is good. His house for example which is an absolutely cracking property, if left to my wife's sister would be sold at the earliest possibility and the money probably spent on a series of holidays and a lavish lifestyle for 5 years. I know and often have to remind my wife of which side the bread is buttered on... If it were ever a decision of where his assets are best left I have every intention of making myself a very good candidate indeed. Not from a selfish point of view, all comes back to wanting to sure up my immediate families circumstances now and in the future.

Thanks for your input pal, do appreciate it.


haventahybrid

Original Poster:

114 posts

80 months

Friday 21st July 2017
quotequote all
DogRough said:
haventahybrid said:
After going back over this thread I think you are probably right wobble

I may just go for it!! Approach it at a slightly differently angle to the above i.e. ask him for the cash in exchange for the equity to the same ratio as is today. So we would keep the 80/20 split and I would make up the additional cost up with increased standing order. He might tell me to bugger off but God loves a trier smile
If it was me I'd tell you to bugger off smile . You could probably draw up a private agreement via a solicitor, but it's not going to override the the lenders first charge interest.
Haha this is partly why I am slightly cautious... If any future SIL ever asked this of me after already giving him two places to live I think I would get the 2.2 out smile

RE your point about the lenders first charge interest, can you enlighten me please? Not following, lender being FIL?

superkartracer

8,959 posts

221 months

Friday 21st July 2017
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Sounds like you can muster around £350k , be a man and purchase ( or let him know ) a house on you own , you never know he might give you a helping hand with zero strings.

It sounds like he has massive control of your life , i'd not like that .

Seen a friend of mines (FLI ) lose tens of millions on a failed project to then come begging for the money he had tied up in his and the partners house , several years down the line he owes them money , things change and this guy was loaded ( and very switched on ) .

Edited by superkartracer on Friday 21st July 15:35

haventahybrid

Original Poster:

114 posts

80 months

Friday 21st July 2017
quotequote all
superkartracer said:
Sounds like you can muster around £350k , be a man and purchase ( or let him know ) a house on you own , you never know he might give you a helping hand with zero strings.

It sounds like he has massive control of your life , i'd not like that .

Seen a friend of mines (FLI ) lose tens of millions on a failed project to then come begging for the money he had tied up in his and the partners house , several years down the line he owes them money , things change and this guy was loaded.

Edited by superkartracer on Friday 21st July 15:32
Thanks, not sure its got anything to do with being a man though smile if I ask him and he agrees as he has no intention of spending said money and thinks it better to be tied into property than a bank or other investment with the added bonus being that his daughter and grandchildren are in a better place then everyone is a winner. I wont feel any less of a man. You are right though, nothings ever certain. Should note also that his wife is / was arguably more affluent than he is, she has no children and she is "Nanna". Be hard pushed to see them both go down the pan! Take your point though.

Jon39

12,782 posts

142 months

Friday 21st July 2017
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Just in case this point is of help.
I have only read your (OP) first post, so apologies if already mentioned.

If 80% of your home is owned by a non-occupant, there is likely to be a capital gains tax involvement when it is sold.




tight fart

2,872 posts

272 months

Saturday 22nd July 2017
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More importantly, this other sister is she single?

haventahybrid

Original Poster:

114 posts

80 months

Saturday 22nd July 2017
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DogRough said:
Sorry i misunderstood, thought you were still going to go part mortgage, but you were talking about borrowing the whole £275K from FIL? in which case, you could still continue with your formal arrangement?
Yes, that would be the eutopia! Will be seeing him later at a garden party so may have a chat then.

haventahybrid

Original Poster:

114 posts

80 months

Saturday 22nd July 2017
quotequote all
Jon39 said:
Just in case this point is of help.
I have only read your (OP) first post, so apologies if already mentioned.

If 80% of your home is owned by a non-occupant, there is likely to be a capital gains tax involvement when it is sold.

The % is only reflected in the declaration of trust, not on the actual deeds so not sure?

haventahybrid

Original Poster:

114 posts

80 months

Saturday 22nd July 2017
quotequote all
tight fart said:
More importantly, this other sister is she single?
Hahaha sorry, she's taken...