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Mortgage or not and what does it mean for our relationship?(14 Posts)
DH and I are planning to buy our first house. We're very lucky and have enough in my savings to buy outright. However we can't decide if it's better to do that or get a small mortgage. Our options are;
Option 1) Buy property outright, 100% will be from my savings.
Pros of option 1 as far as I can see are that we don't have a mortgage - amazingly lucky I know and we really do realise we're very fortunate.
Cons as far as I can see are that if we split DH would be entitled to none of it (except if it had increased in value due to renovations for example). Also would it feel imbalanced as he'd feel he'd brought nothing to the table? Also we both feel that living cost-free due to being lucky enough to have inherited this money isn't quite right. We have considered we could put away each month what we'd otherwise pay in mortgage, and that'd be a fund for house renovations if needed. We'd pay into that 50:50.
Option 2) Buy property with a large deposit from my savings (e.g. 90%) and ring fence that. Get a mortgage for a small proportion, which we pay off equally - this would be a small amount each month, easily affordable to us. In event of us splitting (touch wood won't happen), the deposit I put in would be ring fenced and go back to me, and the proportion that's mortgaged would be split 50:50.
Pros of option 2 as far as I can see are it feels a bit more equal - as we'd both be putting in. It's also more within our principles to pay something for our living costs as opposed to living cost-free.
Cons of this approach are; is it silly, given that we could afford the house outright? The money we didn't spend would stay in savings and hopefully the interest gained would outweigh the mortgage fees. But even so, is it silly to pay when you don't need to borrow the money?
Wow nice Delima to have! What are you going to do to replenish savings? Presume you have some left over? You would be living mortgage free but that mean husband has paid zero into it, where would the money he pays for rent mortgage be going? Would make sense for him to pay what he would have into a saving accounts and further down the line to buy the other half?
If you did split up in 20y and he spent all his earnings he would never be able to get on property ladder.
Does it have be 100% or 90% can't you buy 50/50 he pays mortgage on his half? Still work out slot cheaper?
Interest won't outweigh mortgage fees/interest. If you go for a fix now you'll get c2% I expect. Not easy to find savings interest above that for large sums (e. g. TSB have 5% but only for £2k) and once you get above £1k in interest income you'll start paying tax on it, taking your real returns down.
I don't understand the issue re living cost free, whichever way you deal with it you're going to benefit from the inheritance, unless you give it away.
For info, what we did - I paid for my half of the house with savings cash. Dp put as much as he has and we took a joint mortgage for the difference. But only he pays it as it's for his 'half' although on joint names.
We own the house as tenants in common, owning 50% shares each.
I save more than dp does but we don't have completely joint finances so they are my savings.
I am about to have a small inheritance but dp won't allow me to pay anything off the mortgage with it as he wants to maintain the 50% ownership.
@Akire please could you explain? You said;
"You would be living mortgage free but that mean husband has paid zero into it, where would the money he pays for rent mortgage be going? Would make sense for him to pay what he would have into a saving accounts and further down the line to buy the other half?"
Do you mean that DH should put what he'd otherwise pay as mortgage into savings, and use that to buy me out in part? e.g. if he saved 10% of total value of the house he'd effectively buy 10% off me, to be actioned in the event of a split?
Yes I meant if the money he would have spent in rent is just used as extra to spend not saved then if worse came to it down the line a d you split he would have nothing. I think personally I would be happier paying 50% mortgage just for the satisfaction that it's half yours.
Obviously it's a very personal thing!
@Akire - oh yes he wouldn't just fritter the money away, it'd go into savings!
If you are married, he would be entitled to 50% regardless of what he put in.
I agree with caroldecker, you can't "ring fence" your part if you are married - if you split up all assets could be split between you (not necessarily 50/50).
Based on that, I'd buy it outright - why pay interest to a bank when you could be investing the money?
I think you should buy outright. Live the mortgage free dream! If you save a lot you could always buy a house to rent out in the future.
If you are married please see a solicitor and get advice about a post nup.
A deed of trust is not sufficient if you are married. A post nup isn't foolproof but it is far more likely to meet the criteria to be upheld than a deed of trust which a family court may well set aside in a divorce
To clarify: a deed of trust stating that you own 100 or 90 per cent of the house is not divorce proof. Many conveyancing solicitors will not advise about this!
See a family law solicitor
I'm mortgage free and it honestly feels wonderful.
As other posters have stated pre nups post nups deeds of trust and ring fencing are all very shaky legally speaking. You have to assume that your husband will be entitled to half of all assets whether property or cash.
As you say it is silly to pay money to a mortgage lender for reasons of principal but you may decide you could do better with some of the money in savings. You should absolutely set up a savings plan to pay into instead of a mortgage. Talk things over openly and honestly with each other and decide what you feel most comfortable with. Good luck!
carol is right. You really do need proper legal advice on this as you have entirely the wrong view of it. It is only in a short marriage in England where what you h ad before the marriage is often excluded. Instead roll on say 10 years with some children together and everything you each have tends to be put in the pot and often divided 50/50. the same however applies to your savings though so they are no better protected than if they are in a house.
Pre nups are not always legally enforced.
Do what we did - put every last penny in the house and take as big a mortgage as you can and get a lovely large house. It pays off longer term.
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