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Original poster

Buying house from auntie

34 replies

Nyxx92 · 02/02/2018 11:17

Hello all. Just picking peoples brains really.
Is it possible for my auntie to privately sell her house to me?She owns the house outright so its mortgage free. So could we set up a mortgage but without any bank involved. Of course we would have a charge (i think its called ) on the house like a normal morgage to protect my Auntie if i cannot make mortgage payments so that she will get the amount owed when house is sold. And i can afford the payments i just struggle getting money saved for a normal deposit with 2 kids and all.
How would it work with interest rates?
Has anyone else done this ?
Many thanks
Xxx

OP posts:
wowfudge · 02/02/2018 11:50

Your cannot have a mortgage with interest charged on the repayments between two private, unregulated individuals. The best thing for you to do would be to agree a purchase price with your auntie and see if you can get a suitable mortgage to cover the cost. Your auntie gets her money on completion day. You then need to abide by the terms and conditions of the mortgage in making repayments. There are lots of online mortgage calculator tools you can get an idea from. Do you have a deposit?

Alternatively, your auntie gifts the house to you - she would probably need tax advice on this - and you pay her back via a more informal method. This is fraught with issues though - if you don't pay her, how does she enforce it? If she dies within 7 years of giving you the house, you may have an inheritance tax bill to pay. She may treat the arrangement as though she still owns the house.

Original poster
Nyxx92 · 02/02/2018 11:54

Thankyou for your reply.
So if there was not interest on the repayments could it work ? I dont have a huge deposit saved up but i could make it work if i find the right mortgage. She just like the idea of not going through the bank and wants to explore other avenues before going down that road.

Thanks
Xx

OP posts:
wowfudge · 02/02/2018 11:54

Sorry, I missed the bit about you struggling to get a deposit together. Some mortgage companies allow what is called a vendor assisted or gifted deposit - how this works is that you agree a purchase price but the vendor only asks for part of that to be paid, e.g. house purchase price is agreed at £200k. Vendor gifts 5% deposit (no actual money changes hands here). Purchaser pays £190k.

Or your auntie could just agree to sell to you below market value if she isn't bothered by this and your savings are sufficient for the deposit the mortgage lender requires.

whiskyowl · 02/02/2018 11:56

How do you mean 'no interest on the repayments'?

I'm no expert, but as far as I know there are two main types of mortgage - interest only and interest+capital. With both types, you pay interest!

wowfudge · 02/02/2018 11:57

Family and business don't often mix well. I would rent her house from her rather than having a huge 'informal' loan to pay back. Or buy it from her with a mortgage.

A more informal arrangement could cause all sorts of issues - she should have a will and get proper financial and tax advice.

Original poster
Nyxx92 · 02/02/2018 11:58

Haha no worries. Well i have a small savings but i wouldnt say its enough to go it alone. Its only 1 income coming into the house and while its enough to afford the repayments its not enough to satisfy the amount we would probably need to borrow for the house. (The house prices have shot up in the area over past 2 years )
X

OP posts:
QuiteLikely5 · 02/02/2018 12:00

Op

Yes you can do this. You need the advice of a solicitor though.

Original poster
Nyxx92 · 02/02/2018 12:00

I wasnt sure either to be honest. We can afford interest but i wasnt sure how that would effect taxes and things for my aunt. There just seems like so many different rules and whatnot
X

OP posts:
wowfudge · 02/02/2018 12:06

I agree with you @whiskyowl. I think the OP is thinking of some other arrangement but may be calling it a mortgage because it is being used to pay for a house.

Original poster
Nyxx92 · 02/02/2018 12:09

Yeah sorry. I guess its more like a loan of somesort but with the house being collateral. I dont pay and she can take it back and sell it to get the money. I just wanted to see if it was actually something that was possible
X

OP posts:
whiskyowl · 02/02/2018 12:09

It sounds as though you're suggesting that you pay off your aunt's existing mortgage rather than getting one of your own?

I think that may be fraught with legal, practical and personal problems - I'm not sure a bank would be OK with it.

wowfudge · 02/02/2018 12:09

Buy the house, she gets the money. She gets advice as to how to mitigate against tax, where to put the proceeds of sale, etc - to be fair, if it's her main residence now she won't have a capital gains tax liability anyway. It's not really your concern what she does with the money and you need to do what is right for you in respect of buying her house.

wowfudge · 02/02/2018 12:10

The house is mortgage free according to the OP's first post.

wowfudge · 02/02/2018 12:15

Collateral is provided by the person borrowing the money, not the person loaning the money. Just don't get into a complicated arrangement which, if it goes wrong, leaves you with little protection and the strong possibility of dividing your family into warring factions.

What does it matter to your auntie that you need to get a mortgage to buy her house? As I stated earlier, she gets her money on completion day. It sounds as though you, she or both of you aren't clear on how things work.

whiskyowl · 02/02/2018 12:20

@wowfudge I am totally confused as to what is being proposed here now!! Grin

OP, are you suggesting that your aunt acts as a bank and gives you this house now, and you pay her back its current value + interest over the next 25 years? Because that's not really very much in her interest - she could have a large, secure lump sum now, versus a more uncertain lot of payments in future, you see. I am sure there are legal ways that this arrangement could be tied up, but unless she's a very wealthy and generous woman, this would seem fairly fraught with risk for her.

If you're borrowing from a bank, a mortgage is likely to be the best kind of loan you can get to cover this kind of purchase??

Original poster
Nyxx92 · 02/02/2018 12:22

Ah i think i mean she can reposses the house. Collateral was the wrong word my bad.
My auntie has just moved out to live with her partner and doesnt mind getting the money in installments and it would be easier for me as she wouldnt require a deposit. This was just an idea thst we were wondering about and wasnt sure if it was even a thing ! X

OP posts:
Original poster
Nyxx92 · 02/02/2018 12:32

@whiskyowl yeah that is pretty much it. Can i have a mortgage without a bank. Pay on monthly instalments and if i dont/cant we sell the house and make sure my auntie gets repayed from the profit or she takes the house back. She is rather well off and wants to help is get on the property ladder.

OP posts:
wowfudge · 02/02/2018 12:32

Why don't you rent from her for a while and look into things properly? She'll need to put a proper tenancy agreement in place and fulfil her legal obligations as a landlord, but you get somewhere to live and she gets some income.

Original poster
Nyxx92 · 02/02/2018 12:35

@wowfudge yeah thats an option aswell. But she is looking into buying with her partner and i dont think she wants the hassle of repairs and things. She has a deposit for the new house already and says she doesnt need the sale of this house for it so a mortgage payment each month would be fine

OP posts:
GreenTulips · 02/02/2018 12:36

So you are basically asking to
'Rent' the house until you've paid her back to value of the house at which point it becomes yours?

I'd suggest a rental agreement - for 12 months and see how that works

Original poster
Nyxx92 · 02/02/2018 12:38

I have already been paying rent for 6 months and it would be kept at the same amount so i know i can upkeep the house and bills.

OP posts:
wowfudge · 02/02/2018 12:40

Has a gas safety check been carried out? If not, your auntie is breaking the law.

GU24Mum · 02/02/2018 12:41

Are you saying (which I think you are......), can you buy the house but your aunt will loan you X% of the purchase price and then have a charge on the property.

You will both need to take separate legal advice as the same solicitor could not act for you both but yes, you can do that. You can put a fairly simple form of legal charge in place setting out repayment terms etc.

Original poster
Nyxx92 · 02/02/2018 12:42

Yeah it has been. At all up together but there are a few repairs needs doing nothing thats too awful but it does need to be done. (Replastering , new kitchen, possible repointing of house)

OP posts:
Original poster
Nyxx92 · 02/02/2018 12:45

@GU24Mum thats pretty much what we want. We just wanted some basic knowledge to if it was actually a thing before we sought any legal advice regarding it and paying out for nothing

OP posts:
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