Strange mortgage question...

[Max Turbo]

Hello all,

Me and my GF are looking at getting our first house together. The house we have seen and like is currently owned by my uncle. Currently, it is just sitting there. It is not being let out, and is just an asset not costing nor earning any money to him.

We have discussed the situation with my uncle, and have told him that we are unlikely to be able to get approved for a mortgage for the whole amount and he said that he will happily keep money in the house until we can afford to pay him, ie we can arrange for a smaller mortgage through the bank (as per normal) and set up a private mortgage for the remainder with him. Any further details of the PM have not been discussed.

For argument's sake, say the house is worth 200k. If we got a 100k mortgage with the bank (minus our 10k deposit) and 100k private mortgage with the uncle, how do the LTV numbers all work out? Do we go to the bank with a 45% LTV requirement?

Compared to getting a full conventional mortgage, is there anything else that needs to be done or looked into? (Am not concerned about the doing business with family thing - I have a very good relationship with my uncle and we have all agreed that any PM would be written into a formal contract to avoid any potential problems)

Discuss...

[jamesc_1729]

TBH I would doubt that any bank would be willing to take that on. It is too far removed from there normal way of doing things and in this risk-averse climate they are not obliged to be generous. How do they know that any shortfall is not due to your uncle first and them second???

Having said that, I suppose if your uncle is willing to sell it to you for 100k (to use your example) then there might be a way forward as the LTV on paper will be acceptable. The issue is when they value it at 200k and then smell a rat....

Edited by jamesc_1729 on Monday 16th March 20:31

Edited by jamesc_1729 on Monday 16th March 20:32

[loafer123]

Plenty of people do this - i.e. get a loan from family for a deposit.

The loan from your uncle would have to be unsecured, however, as the mortgage company would not be happy with a second charge over the house.

That being said, this is the biggest decision of your life - if you couldn't get the mortgage normally, do you think you should be taking on that much debt?

[Max Turbo]

jamesc_1729 said:

TBH I would doubt that any bank would be willing to take that on. It is too far removed from there normal way of doing things and in this risk-averse climate they are not obliged to be generous. How do they know that any shortfall is not due to your uncle first and them second???

Having said that, I suppose if you're uncle is willing to sell it to you for 100k (to use your example) then there might be a way forward as the LTV on paper will be acceptable. The issue is if the value it at 200k and then smell a rat....

My intention isn't to try and do a fast one on the bank. I am more than happy for them to know the situation. Also, I would have expected the bank to have "first dibs" on the cash, then my uncle. If the st hit the fan, and we were forced to sell, I would clear the bank debt first, then my uncles. Any left over due to the dreaded NegEq would be paid back to my uncle on a regular payment. He is happy with this. Hope for the best, prepare for the worst - and all that

Surely something like this has been done before? Is it not exactly the same as my uncle giving me a £100k loan in the form of half a house. I only need to generate 100k extra to get the place, so go the bank looking for that amount of cash. The house is worth 200k, I require 100k hence a 50% LTV. Bank has first call on the cash...

[Road Pest]

The PM would have to be disclosed to the lender and therefore would have to be taken into the affordability calculations. He could gift the money to you as deposit paid, however within the current climate a lot of lenders refuse to work in this way anymore due to the fraud that has been going on in the housing market.

ETA - Unless he has the cash lying around rather than using the equity.

We had a similar case come across my desk recently with someone who had done this a few years back and was now coming to remortgage as their deal was ending and due to the affordability issues when taking the PM into account we were unable to source a deal.

Certainly if you only have a 10% deposit you won't be able to make a purchase so some of the gifted money would have to come in the form of deposit for this to work.

Best bet would be to get a broker/IFA to look into it for you

Edited by Road Pest on Monday 16th March 20:43

[Max Turbo]

loafer123 said:

Plenty of people do this - i.e. get a loan from family for a deposit.

The loan from your uncle would have to be unsecured, however, as the mortgage company would not be happy with a second charge over the house.

That being said, this is the biggest decision of your life - if you couldn't get the mortgage normally, do you think you should be taking on that much debt?

I hear what you are saying. Basically, this house has been in the family for over 250 years and my uncle is looking to get rid of it within the next year to generate some cash to put his son through flying school. This comes to about 100k hence why he wants that amount. He is very excited that we are interested in the house and is willing to give us a truely unbeatable deal on the price, hence why I am now doing all the homework to see if its feasible.

Stretching myself, maybe. On the other hand, my gf and I have steady jobs, the house is heated by log fires (inc central heating) and has its own water collection system etc. Bills should be reduced a reasonable amount and the family are all around to help out if needed.

We are just really excited by the idea of having a house that we thought would be a good few houses down the line for us. If we can jump the queue and get this, it would be a house for life.

[Road Pest]

loafer123 said:

Plenty of people do this - i.e. get a loan from family for a deposit.

The loan from your uncle would have to be unsecured, however, as the mortgage company would not be happy with a second charge over the house.

That being said, this is the biggest decision of your life - if you couldn't get the mortgage normally, do you think you should be taking on that much debt?

This is the point - the OP is talking Private Solicitors agreement to work out repayment to the Uncle. If the payments are monthly then affordability may be an issue.

If the cash is there with the Uncle then a loan until the property is sold or remortgaged by the OP might work.

If the cash isn't there I think it will be hard to find a lender now who will take deposit paid.

Edited by Road Pest on Monday 16th March 20:49

[Max Turbo]

Road Pest said:

If the cash is there with the Uncle then a loan until the property is sold or remortgaged by the OP might work.

If the cash isn't there I think it will be hard to find a lender now who will take deposit paid.

Edited by Road Pest on Monday 16th March 20:49

Just to clarify, are you saying that if I have a loan arrangement set up with my Uncle whereby I am not obliged or contracted to make payments to him for the loan until sale or remortgage, then this may be possible?

If so, I think this would probably be the way the arrangement went. I would personally make payments to him on an adhoc basis but my only contractually required monthly repayments would be to the bank. When I come around to remortgage, I can then either carry on and remortgage the existing amount owed to the bank, or I can add on the amount owed to my uncle. Alternatively, I can sell and pay back both parties.

Have I got that right?

[Road Pest]

Max Turbo said:

Road Pest said:

If the cash is there with the Uncle then a loan until the property is sold or remortgaged by the OP might work.

If the cash isn't there I think it will be hard to find a lender now who will take deposit paid.

Edited by Road Pest on Monday 16th March 20:49

Just to clarify, are you saying that if I have a loan arrangement set up with my Uncle whereby I am not obliged or contracted to make payments to him for the loan until sale or remortgage, then this may be possible?

If so, I think this would probably be the way the arrangement went. I would personally make payments to him on an adhoc basis but my only contractually required monthly repayments would be to the bank. When I come around to remortgage, I can then either carry on and remortgage the existing amount owed to the bank, or I can add on the amount owed to my uncle. Alternatively, I can sell and pay back both parties.

Have I got that right?

I run the department that qualifies cases for appointments with mortgage advisors. I think this MAY work if the bank agrees to the terms.

Just thought of a different way:

Put you and g/f on mortgage with Uncle. Then raise the 100k your uncle needs, that would work as long as you all fit the usual qualifying criteria and it's a lot more straight forward.

ETA - Then draw up an agreement that the Uncle owns the other 100k or a certain percentage of the house or 100% of everything above 100k of the val - best done through a good solicitors.

Edited by Road Pest on Monday 16th March 21:10

[King Herald]

Max Turbo said:

Hello all,

Me and my GF are looking at getting our first house together. The house we have seen and like is currently owned by my uncle. Currently, it is just sitting there. It is not being let out, and is just an asset not costing nor earning any money to him.

We have discussed the situation with my uncle, and have told him that we are unlikely to be able to get approved for a mortgage for the whole amount...

Discuss...

The reason you won't get a 200k mortgage is because YOU can't afford to owe/pay 200k off, especially when it is shared with a girlfriend who might not be around in a week/month/year.

The whole thing looks too complicated to work, such as what happens to who when GF decides she wants to get out after a year, and wants her 'share' of the 200k house?

[Max Turbo]

King Herald said:

Max Turbo said:

Hello all,

Me and my GF are looking at getting our first house together. The house we have seen and like is currently owned by my uncle. Currently, it is just sitting there. It is not being let out, and is just an asset not costing nor earning any money to him.

We have discussed the situation with my uncle, and have told him that we are unlikely to be able to get approved for a mortgage for the whole amount...

Discuss...

The reason you won't get a 200k mortgage is because YOU can't afford to owe/pay 200k off, especially when it is shared with a girlfriend who might not be around in a week/month/year.

The whole thing looks too complicated to work, such as what happens to who when GF decides she wants to get out after a year, and wants her 'share' of the 200k house?

ETA gf of nearly 6 years, soon to become Mrs Turbo. We can afford the repayments easily enough, its just the deposit on a 200k mortgage that we would struggle to raise now. Normally, we would wait but the uncle is keen to raise the 100k in the next 6 months or sooner.

[Road Pest]

Max Turbo said:

King Herald said:

Max Turbo said:

Hello all,

Me and my GF are looking at getting our first house together. The house we have seen and like is currently owned by my uncle. Currently, it is just sitting there. It is not being let out, and is just an asset not costing nor earning any money to him.

We have discussed the situation with my uncle, and have told him that we are unlikely to be able to get approved for a mortgage for the whole amount...

Discuss...

The reason you won't get a 200k mortgage is because YOU can't afford to owe/pay 200k off, especially when it is shared with a girlfriend who might not be around in a week/month/year.

The whole thing looks too complicated to work, such as what happens to who when GF decides she wants to get out after a year, and wants her 'share' of the 200k house?

ETA gf of nearly 6 years, soon to become Mrs Turbo. We can afford the repayments easily enough, its just the deposit on a 200k mortgage that we would struggle to raise now. Normally, we would wait but the uncle is keen to raise the 100k in the next 6 months or sooner.

I think adding all of you to the mortgage and then remortgaging the property is your best bet. All you need to do is come up with an agreement then with your Uncle as to when he wants out of the rest of the house.

[Max Turbo]

Road Pest said:

Just thought of a different way:

Put you and g/f on mortgage with Uncle. Then raise the 100k your uncle needs, that would work as long as you all fit the usual qualifying criteria and it's a lot more straight forward.

ETA - Then draw up an agreement that the Uncle owns the other 100k or a certain percentage of the house or 100% of everything above 100k of the val - best done through a good solicitors.

Sorry, I am probably being stupid but could you just clarify that first paragraph please. It sounds like you know considerably more than I do so I just want to make sure that I understand you

[jamesc_1729]

Max Turbo said:

jamesc_1729 said:

TBH I would doubt that any bank would be willing to take that on. It is too far removed from there normal way of doing things and in this risk-averse climate they are not obliged to be generous. How do they know that any shortfall is not due to your uncle first and them second???

Having said that, I suppose if you're uncle is willing to sell it to you for 100k (to use your example) then there might be a way forward as the LTV on paper will be acceptable. The issue is if the value it at 200k and then smell a rat....

My intention isn't to try and do a fast one on the bank. I am more than happy for them to know the situation. Also, I would have expected the bank to have "first dibs" on the cash, then my uncle. If the st hit the fan, and we were forced to sell, I would clear the bank debt first, then my uncles. Any left over due to the dreaded NegEq would be paid back to my uncle on a regular payment. He is happy with this. Hope for the best, prepare for the worst - and all that

Surely something like this has been done before? Is it not exactly the same as my uncle giving me a £100k loan in the form of half a house. I only need to generate 100k extra to get the place, so go the bank looking for that amount of cash. The house is worth 200k, I require 100k hence a 50% LTV. Bank has first call on the cash...

Sorry, I appreciate you aren't trying to misrepresent to the bank, I was merely saying that the setup is more complicated than they would like given that in the current climate there are more subcribers to any mortgages than the finance to back all the new business.

Imagine their position if they have:
a) You with your situation, compared to
b) a FTBer couple with a 15+% deposit on the whole property value.

You can imagine that, since it is much less complicated, they will go with b) every time.

Having said that, the options above whereby your uncle might make a trust/gift to you is an entirely different matter, and one which legally would be more straightforward to a lender. I was simply commenting on your idea of having a regular + private mortgage.

For what it's worth I personally wish you every success in sorting this matter out as, if you can find a way a bank will agree to, it seems to make sense.

[Max Turbo]

jamesc_1729 said:

Max Turbo said:

jamesc_1729 said:

TBH I would doubt that any bank would be willing to take that on. It is too far removed from there normal way of doing things and in this risk-averse climate they are not obliged to be generous. How do they know that any shortfall is not due to your uncle first and them second???

Having said that, I suppose if you're uncle is willing to sell it to you for 100k (to use your example) then there might be a way forward as the LTV on paper will be acceptable. The issue is if the value it at 200k and then smell a rat....

My intention isn't to try and do a fast one on the bank. I am more than happy for them to know the situation. Also, I would have expected the bank to have "first dibs" on the cash, then my uncle. If the st hit the fan, and we were forced to sell, I would clear the bank debt first, then my uncles. Any left over due to the dreaded NegEq would be paid back to my uncle on a regular payment. He is happy with this. Hope for the best, prepare for the worst - and all that

Surely something like this has been done before? Is it not exactly the same as my uncle giving me a £100k loan in the form of half a house. I only need to generate 100k extra to get the place, so go the bank looking for that amount of cash. The house is worth 200k, I require 100k hence a 50% LTV. Bank has first call on the cash...

Sorry, I appreciate you aren't trying to misrepresent to the bank, I was merely saying that the setup is more complicated than they would like given that in the current climate there are more subcribers to any mortgages than the finance to back all the new business.

Imagine their position if they have:
a) You with your situation, compared to
b) a FTBer couple with a 15+% deposit on the whole property value.

You can imagine that, since it is much less complicated, they will go with b) every time.

Having said that, the options above whereby your uncle might make a trust/gift to you is an entirely different matter, and one which legally would be more straightforward to a lender. I was simply commenting on your idea of having a regular + private mortgage.

For what it's worth I personally wish you every success in sorting this matter out as, if you can find a way a bank will agree to, it seems to make sense.

Sorry if I came across as defensive! I didn't mean it as such - thanks for your thoughts!

[Road Pest]

Max Turbo said:

Road Pest said:

Just thought of a different way:

Put you and g/f on mortgage with Uncle. Then raise the 100k your uncle needs, that would work as long as you all fit the usual qualifying criteria and it's a lot more straight forward.

ETA - Then draw up an agreement that the Uncle owns the other 100k or a certain percentage of the house or 100% of everything above 100k of the val - best done through a good solicitors.

Sorry, I am probably being stupid but could you just clarify that first paragraph please. It sounds like you know considerably more than I do so I just want to make sure that I understand you

I assume the cash isn't liquid to gift you, so the money would come in the from the equity in the house, like a discount. The lenders are funny about this as they like to now take the value at what the purchaser actually physically pays for it. This will get you into complications with the lender.

So, if you and your girlfriend get added to the Deeds of the property with your Uncle, you then all jointly own the house. Then remortgage the property for 100k with you all on the mortgage. You are then only subject to the normal criteria. I.E LTV, Income, past bad credit, etc. LTV is at ~50% so that's all good, Income would need to be 25k+ joint, and if anyone has any bad credit (CCJs, defaults) that may cause you a problem. There are other bits of course but you'd be better off talking to an advisor about those when you're ready.

Then of course draw up agreements to when the rest is to be paid to your Uncle and take his name off the mortgage so he's not liable, if that's what you want to do.

This is the most likely way and easiest way round the situation IMO.

Edited by Road Pest on Monday 16th March 22:18

[Max Turbo]

Perfect!! Thank you very much!

[Road Pest]

Max Turbo said:

Perfect!! Thank you very much!

Remember when you are ready to go make sure you talk to a broker or IFA as they will offer a higher level of service than a lender directly including advising you of the best step forward and potential hazards, very much worthwhile taking in normal situations but even more so here. Let me know how you get on, I'll bookmark the thread.

Edited by Road Pest on Monday 16th March 22:36

[scotal]

I think Road Pest's solution work,s but it has a couple of wrinkles.

1. Does your uncle have a mortgage of his own? If he does then theat will be taken into account when looking at the affordability o the mortgage. The lenders will demand he can afford both on his own income.

2.Your uncle's age will also be taken into account by the mortgage lender.

3. You should be able to transfer the property into your name, with a mortgage, then put a 2nd charge on the house in your uncles favour.
The lender would have to know about the charge, but a dcent lawyer should be able to sort this for you at the time. This is a trust issue for your uncle though, as obviously he will have to be removed from the deeds of the property without having received all his funds. (I wouldn't do that, he might.)

Gifte deposits arent uncommmon, and this effectively is how a lnder is going to look at this.

[Road Pest]

scotal said:

I think Road Pest's solution work,s but it has a couple of wrinkles.

1. Does your uncle have a mortgage of his own? If he does then theat will be taken into account when looking at the affordability o the mortgage. The lenders will demand he can afford both on his own income.

2.Your uncle's age will also be taken into account by the mortgage lender.

3. You should be able to transfer the property into your name, with a mortgage, then put a 2nd charge on the house in your uncles favour.
The lender would have to know about the charge, but a dcent lawyer should be able to sort this for you at the time. This is a trust issue for your uncle though, as obviously he will have to be removed from the deeds of the property without having received all his funds. (I wouldn't do that, he might.)

Gifte deposits arent uncommmon, and this effectively is how a lnder is going to look at this.

That's why he should speak to an advisor, it's much more complex than the base points I covered.