Shared equity type situation

[Piglet]

It's likely that I will buy (genuinely at market value) a half share of my dad's house at some point.

On the basis I have enough income for the amount of mortgage I'm looking at am I likely to find a mortgage lender to go with this?

Dad will own his half of the house outright and we will all live their (building a grampa annexe for him!)

Any thoughts/experiences on this?

(I'm not sure how I got the heart smilie! Random clicking on my part I guess!)

Edited by Piglet on Monday 29th October 11:50

[walm]

I bought a place with a mate.
He bought in cash, I needed a mortgage for my half, so vaguely similar to your situation.
Legal stuff: both our names were on the leasehold/freehold, as a result both of our names were on the mortgage (even though I paid it 100%).
So, the mortgage companies assessed both of our financial situation and would only loan up to 2.5x our combined gross salaries.
These days I believe that number is closer to 3.5x but not sure.
I don't think there is any way to avoid this.

We also had a "pre-nup" type agreement drawn up by a solicitor explaining what we would do when one or other of us wanted to sell.
IMHO this is VITAL.
We had no idea who would want to sell first so in a "veil of ignorance" type of way the pre-nup was fair.
Without that pre-nup you are leaving yourself open to some potentially horrible situations.

[Piglet]

walm said:

So, the mortgage companies assessed both of our financial situation and would only loan up to 2.5x our combined gross salaries.
These days I believe that number is closer to 3.5x but not sure.
I don't think there is any way to avoid this.

Thanks for that Walm, that's interesting....this is my concern - Dad is 73 and has a decent pension but not enough to service or justify a mortgage and I doubt I've got enough salary to keep the mortgage co happy on the entire value of the property.

[walm]

Piglet said:

walm said:

So, the mortgage companies assessed both of our financial situation and would only loan up to 2.5x our combined gross salaries.
These days I believe that number is closer to 3.5x but not sure.
I don't think there is any way to avoid this.

Thanks for that Walm, that's interesting....this is my concern - Dad is 73 and has a decent pension but not enough to service or justify a mortgage and I doubt I've got enough salary to keep the mortgage co happy on the entire value of the property.

Remember you just have to keep them happy on the entire value of the mortgage not the property.
I am assuming your Dad owns the place outright?
Say you are valuing the place at £300k and paying your Dad £150k for 50%, you need a £150k mortgage.
Will your + your Dad's gross income = 150/3.5 = £43k or so?
Of course, your Dad won't be paying the mortgage - you will. The banks just don't see it that way.

One further option you might consider is to buy less off your Dad. Does he really need the cash?
You could buy up to whatever the mortgage company is willing to lend.
So if they will only lend £100k just buy 1/3 of the property.

[Piglet]

Ah yes, I'd got confused about having to provide income for the whole value. My income is sufficient for the mortgage and he's got a couple of decent'ish pensions, although ideally I'd rather keep him off the mortgage so he doesn't have to worry too much about it but I guess he provides the security (of the owned 50%) so they'll want him on it.

A lower percentage might be an option but my sister is I think a little twitchy that I'm either ripping him or her off so half seems a good idea...

[scotal]

Piglet said:

Ah yes, I'd got confused about having to provide income for the whole value. My income is sufficient for the mortgage and he's got a couple of decent'ish pensions, although ideally I'd rather keep him off the mortgage so he doesn't have to worry too much about it but I guess he provides the security (of the owned 50%) so they'll want him on it.

A lower percentage might be an option but my sister is I think a little twitchy that I'm either ripping him or her off so half seems a good idea...

Income for the mortgage should be all thats required. If you are both to be on the deeds, then they will want you both as a party to the mortgage. However your dad's age is going to narrow the number of lenders available to you. (Not by much, but there are those who wont go above either 65 or 70 years of age)

If your sister is worried about you ripping her off, maybe a form of prenup is required, probably something to do with your dad's will. Have a word with rudeboy on here, he does a lot of conveyancing work, and is recommmended.

[Piglet]

Thanks for that Scotal, to make this worse it's non standard construction (Woolaway bungalow) so I guess I need to start digging on the mortgage point sooner rather than later if we're adding extra problems into the mix!

[scotal]

Piglet said:

Thanks for that Scotal, to make this worse it's non standard construction (Woolaway bungalow) so I guess I need to start digging on the mortgage point sooner rather than later if we're adding extra problems into the mix!

Oh yeah... precast concrete...... deep joy.

[Deep Breath] If you want a hand finding a lender, drop me a pm. [Exhale]

[Piglet]

scotal said:

Piglet said:

Thanks for that Scotal, to make this worse it's non standard construction (Woolaway bungalow) so I guess I need to start digging on the mortgage point sooner rather than later if we're adding extra problems into the mix!

Oh yeah... precast concrete...... deep joy.

[Deep Breath] If you want a hand finding a lender, drop me a pm. [Exhale]

Cool - I'll tell you about my CCJ's as well

(That's a joke, I have a beautiful credit rating )

We're probably still a little while away from doing this. Going for planning for the grampa annexe in the new year and then we'll look at financing.

Cheers