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Original poster

What is the fairest way to buy this?

60 replies

Tripletsfun · 18/11/2019 08:08

Not sure if this is the right place to ask but would appreciate any advice about this.

I am buying a one bed flat with my sister. It’s the only way I can afford it as my salary alone would not give me the mortgage. I am putting the whole deposit down and will be living in the flat. I plan on paying for renovations and also all expenses, mortgage payments and bills. My sister will not be living there and is renting elsewhere. She does not own her own property.

What is the fairest way to own this?

OP posts:
flowery · 18/11/2019 08:11

If you’re paying the deposit and the mortgage how are you buying it together?

00100001 · 18/11/2019 08:13

Just have the split of ownership as 99% to you, 1% to her?

If you're just using her as a "second" income. You'll have a joint mortgage. And she will be liable. She needs to protect herself.

Quartz2208 · 18/11/2019 08:13

I assume you need her on the mortgage to get the amount

The problem is that your sister is losing out on 1st time buying benefits etc and may find it harder when she wants to herself so needs some benefit from this

But isn’t actually putting any money in

It’s a terrible idea OP and one which is bound to cause fallout

Original poster
Tripletsfun · 18/11/2019 08:16

I was thinking I might give her 20% and I own 80% and that makes up for her losing any first time benefits.

OP posts:
Aquicknamechange2019 · 18/11/2019 08:17

What happens when your sister wants to buy a place of her own though - will you be able to buy her out and take on the mortgage yourself?

GiveHerHellFromUs · 18/11/2019 08:18

What happens if you decide to sell, or if she decides to buy another property because isn't it much harder to get a second mortgage?

PurpleDaisies · 18/11/2019 08:18

I’m a bit confused.

Is she contributing financially to this house?

Original poster
Tripletsfun · 18/11/2019 08:22

I guess when she wants to buy could she not get a second mortgage (possibly with me on it as well if that’s would help) and buy a place and live in that?

OP posts:
AlwaysCheddar · 18/11/2019 08:22

Why????

Sleepingboy · 18/11/2019 08:23

Why are you not just buying it yourself? What do you and your sister gain doing it like this?

Original poster
Tripletsfun · 18/11/2019 08:25

Because I wouldn’t be able to get a mortgage by myself - even though I can meet the repayments every month. She doesn’t have a deposit and wants to help me out and this would also get her on the property ladder. Therefore I’m tryig to think of the fairest way to own it.

OP posts:
GiveHerHellFromUs · 18/11/2019 08:26

I strongly suggest your sister looks into how difficult it would be for her to get a second mortgage as officially she will already be contributing to one household.

If the bank don't think you can afford one mortgage they won't think that two of you can afford two.

She might also meet someone and want to buy a house and could do the relationship some damage if they think she's choosing a home for you over a home for them.

MyKingdomForBrie · 18/11/2019 08:28

Consider how much you want to pay her for her services, then consider the value of the property - so if it's a 100k property and you think 10k (at the moment) is fair then give her 10%. It's a hell of a lot of benefit to her for doing nothing, I definitely think it's enough compensation for losing FTB status. It's dangerous though - what if she wants to cash in in a few years to get a deposit (esp as she won't be able to use HTB) and you have to sell up?

8Iris8 · 18/11/2019 08:29

My husband did something similar with his brother a few years ago, but it was his brother who lived in the flat at first, and we moved into it a few years later. When my brother-in-law decided he wanted to buy his own place we had the flat valued and paid him the equivalent of half of what the value increase was. As he wasn’t actually on any of the paperwork it was an easy transaction. It worked in our situation as we are very close to my BiL and my dad helped us out with the lump sum, but I can see it could cause problems if say your sister wanted her share (even if only 20%) and you didn’t have the cash available. What would happen in that situation?

PurpleDaisies · 18/11/2019 08:31

This is a terrible idea. Your sister is potentially screwing herself financially in terms of ever buying her own home.

Her owning 20% of something that doesn’t provide any income and can’t be sold because you’re living in it won’t be if any use when she tries to buy her own house, plus being tied to paying the mortgage in it, is a terrible idea.

Don’t be selfish. Go it alone, even if that means buying something smaller to start with, or waiting.

QueenoftheIceAge · 18/11/2019 08:33

The only person that this benefits is you. She will only have disadvantages:

  • She will find it much harder to buy herself a property, with no first time buyer benefits.
  • Taking a second mortgage requires a massively higher deposit so if she can’t afford a deposit now that will put buying for herself even further out of her reach.
  • She will be legally liable for a property she has no control over.
  • Even if you assign 20% of the property to her, or whatever figure you decide, she won’t see any benefit unless you sell, and even then only if you make a profit.
She’d have to be a bloody nice sister to essentially give up the chance of ever owning a property for herself so that you can instead!!
PurpleDaisies · 18/11/2019 08:33

As he wasn’t actually on any of the paperwork it was an easy transaction.

From the sound of it, the op’s sister has to be on the paperwork for the op to get the mortgage.

BackOnceAgainWithABurnerEmail · 18/11/2019 08:34

She doesn’t get anything though, does she? Not until you die or decide to ‘buy her out’. Isn’t this all theoretical unless you’re planning to sell in a couple of years?

She clearly hasn’t realised that if she wants to buy she’ll be considered to be buying a second home and will be liable for ££££ more on stamp duty etc.

BackOnceAgainWithABurnerEmail · 18/11/2019 08:40

On stamp duty alone, as a first time buyer she’d pat none on property under £300k.

If she does this for you but you buy her out before she buys she’ll pay stamp duty on a home even under £300k as your property has used up her first time buyer status.

If she wants to buy and she’s still on your mortgage she’ll pay 3% on top of the standard rates.

Stamp duty has to be paid in cash so she’ll need it on top of a deposit.

Maybe you should pay her a set amount a month so her stamp duty in covered in the future?

BackOnceAgainWithABurnerEmail · 18/11/2019 08:43

On a £300k property, stamp duty =
First time buyer £0
Second time buyer £5k
Second home £14k

Beautiful3 · 18/11/2019 08:47

My friend did this for her mother, to enable mum to buy a place after her divorce. It meant that she struggled to get a second mortgage when she was ready to buy with her husband. It was also a higher rate because of it. I personally dont think it's a good idea. How would she ever get her money back from the house? Are you planning to sell it or are you going to be living there indefinitely?

LemonTT · 18/11/2019 08:48

The reason you can’t get a mortgage is because you can’t afford the repayments every month. That is what has been assessed by the lender. They will have taken into account changes in circumstances and other factors that make lending to you too much of a risk.

It is unfair and unwise to ask a family member to take on the risk. She will be liable for the mortgage payments, she will have reduced access to future lending and would incur higher stamp duty on another property.

Equally, she has title to the property and this can be exercised at anytime. This might be something beyond her control, for example if she got into financial difficulties. Unless you have a legal agreement, acceptable to the lender, you could find yourself in an unpleasant situation.

If you proceed with this, do it properly and accept it is a joint mortgage. Make this a proper business arrangement, which is reflected in your arrangement with the lender. Anything else is deceptive.

Leave aside the deposit which can be protected. As she is taking out a joint mortgage she is entitled to half of the rest of the asset. She can live there or rent out her half. Effectively she will be renting back to you.

Pythonesque · 18/11/2019 08:52

For any of this to make sense I think you have to create a coherent long-term plan that would eventually lead to you both ending up with properties. If you truly think you can afford the mortgage you need, then I suggest discussing the details with a mortgage broker to see if there is any way you can get it on your own. And if not, is there any way you can find a place that you could afford to purchase and live in together in order to save and build up equity for you both? I realise you may not work close enough to each other for that to be viable. Hope you can come up with something, agree that your current proposal seems problematic.

Original poster
Tripletsfun · 18/11/2019 10:39

I think 10% will cover any increase in stamp duty should she buy in the future. I am not asking her to cover any of the refurbishments or any costs in this and she is a high earner and likely to have her earning go up so from
That point of view I am not worried.

OP posts:
PurpleDaisies · 18/11/2019 10:41

When does she get her 10% though? What if she wants to buy in a year or two?