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Original poster

Invest in property with sibling

22 replies

RightThenWhatNext · 22/04/2022 06:42

House is valued at £475k… I can fund a deposit of £200k (42%) sibling can put in £50k then they will get a mortgage for the rest and live in the house with their family. I live elsewhere with my family.

How would it then work later in terms of splitting the equity? Is my share always 42%?

OP posts:

Lunar27 · 22/04/2022 09:11

I'm sure there are calculators for this but it's a tricky one IMO.

Although you'd put 42% in, you've created a very beneficial situation for your sibling as the extra £200 will make a massive difference to the mortgage (LTV and monthly payments).

Could they afford the mortgage without your input? I'm guessing not.

I might be being unreasonable but I'd be looking at 50/50 as your money will also be tied up for an indefinite period and you'd be doing them a huge favour.

But personally for me, sibling or not, I wouldn't mix money like that.

GrumpyPanda · 22/04/2022 09:17

Will they be paying rent or some form of interest for the part you own? Otherwise, massively bad investment since you're forgoing regular returns and simply speculating on future asset appreciation.

Crazylazydayz · 22/04/2022 09:20

You need a deed of trust setting out % ownership. I would say yes you own 42%.

carefullycourageous · 22/04/2022 09:20

Why are you doing this? Your motivation is important to the answers.

What happens if you need the money back - will you force a sale of their home?

How long do they get to use your £200k? Until they die?

carefullycourageous · 22/04/2022 09:21

GrumpyPanda · 22/04/2022 09:17

Will they be paying rent or some form of interest for the part you own? Otherwise, massively bad investment since you're forgoing regular returns and simply speculating on future asset appreciation.

Agree with this, you need to think it through @RightThenWhatNext

Crazykatie · 22/04/2022 09:26

Be careful of this, if you are getting a mortgage but not living there there are all sorts of complications that apply, in particular they will likely want you to guarantee the payments.
Find out what the rules are before you get too committed.

maxelly · 22/04/2022 15:58

Yes I doubt your sibling will be able to get a substantial mortgage if they only own ~50% of the property, there are a few specialist products for this kind of situation but likely you may have to be named on the mortgage and/or guarantee the payments.

In terms of ownership you'd be tenants in common with a deed of trust, you can set the % ownership at basically whatever you want but seems sensible to say either 42% forever, or you can say you take your £200k back, sibling takes their £50k back and any remaining equity is split 50:50 (or in whatever % split you want) ... the latter doesn't really reflect that sibling is paying off the mortgage solely, but maybe fairer given you aren't getting any rent or interest on your money and may perhaps need to contribute to ongoing maintenance/rent?

Do be aware of the possible tax implications if/when the property is sold also?

Original poster

RightThenWhatNext · 22/04/2022 20:02

Thanks all. It’s just an idea at the mo.

Sibling is currently looking at a bit of a naff house in a naff area for 275k (FTB). They have 50k to put down as the deposit, so I wondered if it could be good if I chip in so my money is invested and they get a nicer house.

I wouldn’t want to be on the mortgage at all, that’s all for them to take care of. No plans for them to pay me interest or rent, it’s more about the asset appreciation. My motivation is I don’t know what I want to do with the 200k and feel property is a safe-ish long-term investment.

Of course the money/family thing is a little nervy. And indeed I hadn’t thought of a time-limit. That could get tricky… I would possibly need to access the cash for the kids uni funds in 8-15 years time.

OP posts:

GodSaveTheQueen2022 · 22/04/2022 20:46

do you own another house? 2nd property stamp duty
You will be eligible for tax on any rent from them
CGT when you sell

Original poster

RightThenWhatNext · 22/04/2022 21:13

Yes I do own another house.
If the house is in my sibling’s name and they are a FTB, what happens to Stamp Duty then?
I won’t have any rental income from it…

OP posts:

GodSaveTheQueen2022 · 22/04/2022 21:24

RightThenWhatNext · 22/04/2022 21:13

Yes I do own another house.
If the house is in my sibling’s name and they are a FTB, what happens to Stamp Duty then?
I won’t have any rental income from it…

You are not on the deeds
You have to sign to say the deposit is a gift

You fall out and they legally have your £200k- it was a gift!

Iamtired2022 · 24/04/2022 22:12

Look into getting a loan agreement and it says she pays you back £XXX a month. If you say its a gift, then its a gift. I've got a loan agreement with my parents for a house purchase. Not sure how it will affect her getting a mortgage though. Lovely thing to do though but think of yourself and family when you will need the money back

HollowTalk · 24/04/2022 22:21

Does your sibling have a partner?

Crazykatie · 25/04/2022 09:52

Falling out with a family member over money is depressingly frequent, gifting modest amounts to help out is OK but £200k is too much.

If your sibling is going to get a mortgage he will be employed, what happens if he cannot work, the house will be sold and he will be homeless, you want to help but it can go badly wrong.
Personally I would not get involved in “buy to let” the taxation, regulations and management will eat into any profit you make, ISAs are best of all, along with long term investments like pensions.

Crazykatie · 25/04/2022 09:59

Missed the bit about the kids Uni fund, then definitely don’t get involved I sibling housing, using ISAs to grow the money and redeem it as you need is by far the best plan because it’s so flexible. As you have children you can get ISAs for then too

titchy · 25/04/2022 10:03

And does sibling's partner have any ownership? If I was their partner I'd want to be recognised as part owner. Which means a court could force the house sale if they split. Could get nasty and leave you spending £££ on legal fees.

If you want to invest in property get a BTL of your own.

senua · 25/04/2022 10:09

No plans for them to pay me interest or rent, it’s more about the asset appreciation.
What if it doesn't appreciate? What if property generally appreciates but your sibling wrecks this particular house?
You have to check your assumptions. It's human nature to hope for the best but you have to plan for all worst-case scenario. That's what you pay lawyers for.

BuanoKubiamVej · 25/04/2022 10:22

I would possibly need to access the cash for the kids uni funds in 8-15 years time.

This rings massive alarm bells

What happens then? Does your sibling have to take a massive cut in quality of life and trade down to something more mediocre then? What if the properties that your sibling could afford now are no longer affordable then, when they no longer have your money?

I get that you are trying to do something nice but there are huge pitfalls here.

Rather than putting in £200k now and pulling them into a lifestyle bracket that they can't sustain without you, instead sign over £50,000 to them now so that they can get a £325k house which is hopefully less naff than the one you dislike. Potentially with a condition on that they need to leave a sum equivalent to £50,000 in today's money (inflation linked) to you, your children or grandchildren whoever is surviving, in their will, unless they pay the sum back earlier in the event that they become able to do so.

Don't do anything with money and family involving sums of money that you couldn't just write off if they never pay you back. Obviously if you never see that £50k again it will hurt, but given that you have £200k you aren't going to be destitute if they don't ever repay.

DaisyDozyDee · 25/04/2022 10:32

We did this (with much smaller sums involved). It allowed my sibling to buy a nicer flat than they could otherwise afford at the time.
We put in a quarter of the value.
As an investment, it was a fairly bad move as the property value hasn’t risen much compared to other areas or to just leaving the cash in ISAs etc. We have no regrets at all though. It was a way of paying forward some of the dumb luck we had with the purchase of our first house, which doubled in value in about a year.
There were also good reasons why it mattered to me to have a tie to the area even though we couldn’t relocate there.
We did go in to the agreement with the attitude that it had to be their home to do with what they wanted though, including if they decide to sell at any point, so we didn’t focus on protecting our money at all cost.

Grandville · 25/04/2022 10:44

If you will need the money in the medium term then don't do it. Your sibling is unlikely to save 200k in 8 years so what will happen when you need the money. Would you force them to sell thier home?

carefullycourageous · 25/04/2022 21:29

This is just a really bad idea, I think.

Get robust legal and financial advice before promising anything, you will potentially tie up all your money and be unable to support your children.

AlexanderTheGreat · 25/04/2022 21:51

Absolutely terrible idea, I fear. You really don’t want to tie up your kids’ uni money in your sibling’s house, which they may not want to leave. May go down in value, may be hard to sell etc etc.

I also think there may be issues re the mortgage- you may need to be joint applicants, meaning you’ll be liable for payments if your sibling doesn’t pay. As I understand it, any mortgage would be secured on the whole house, not just on your sibling’s share.

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