Can you buy half a house from a relative?

Scam

Scam

Scam

Soldato
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As title. Long story short my Dad has been living abroad for a while now and is getting to the point where it may be more permanent. He owns a flat which has been looked after by another relative who is now moving on. We're fed up of our current flat and interested in moving there.

Rather than rent it from him, we were floating the possibility of buying a proportion of it from him to give him a lump sum, and so that we're actually doing something useful with our savings rather than watching them being frittered away into thin air.

Is this a good idea? We're FTBs, probably wouldn't outgrow the flat for 5+yrs and are thinking it might be a good way to get half a toe onto the ladder. It's next door to a massive development and is 15min walk to what will be a Crossrail station too. On paper we shouldn't lose money on it but being FTB's in London we've also spent the last 5yrs convincing ourselves that a property crash is coming. Oh, we can't afford to buy all of it. It'd be a stretch to buy half of it to be honest.. :(
 
Yes you can, I done something similar where I bought my Aunts half of my grandparents house (left between my dad and his sister / my aunt) so me and my dad now own it and I pay the mortgage and live there.

When speaking to the mortgage company your dad will need to be on the title as he owns half and if you faultier on repayments then he would need to take over - but if he is over 75 then getting a mortgage might be difficult for you as I had a similar issue where I could only get a mortgage for 15 years - my dad was 60 at the time.
 
RJC said:
Yes you can, I done something similar where I bought my Aunts half of my grandparents house (left between my dad and his sister / my aunt) so me and my dad now own it and I pay the mortgage and live there.

When speaking to the mortgage company your dad will need to be on the title as he owns half and if you faultier on repayments then he would need to take over - but if he is over 75 then getting a mortgage might be difficult for you as I had a similar issue where I could only get a mortgage for 15 years - my dad was 60 at the time.
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He's 60, so we might have trouble getting the mortgage for our half?
 
What will you do when you want to move and the time comes to sell it? Will your dad want to sell his half as well, or let a random person buy your half?
 
Scam said:
He's 60, so we might have trouble getting the mortgage for our half?
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Usually the maximum age is 75 but you need to speak to the mortgage company - I went with Nationwide and my Dad was the same age when I bought the house 18 months ago and they would only allow me 15 years mortgage which would take my Dad upto 75.
 
As has been said, I'd be pretty wary about buying half a house from relatives. Not saying that it'll end badly, but there's all the potential for it to go that way. As has been said, what happens at the end when you want to move. What happens if your dad wants to get shot of his half at some point and all the issues surrounding that. I'd personally take a long hard think about this rather than just jumping straight in.
 
Easiest way is to agree a full purchase price. Then get a mortgage for half of it. Your dad then puts a charge on the property for the amount of the other half.

Mortgage company may even look at it with a 50%LTV getting you a decent rate.
 
Yeah it's tricky. Made a bit unlikely because it would be such a stretch for us to buy even half of it. I'm not sure we'd want to stretch that far for half a house. As amazing as it is.

I guess if either half wanted to sell, we'd both have to. I haven't even thought about the maths but if we bought half and he wanted to sell up in 5-10yrs time then I doubt very much we'd be in a position to buy him out!

mattyg said:
Easiest way is to agree a full purchase price. Then get a mortgage for half of it. Your dad then puts a charge on the property for the amount of the other half.

Mortgage company may even look at it with a 50%LTV getting you a decent rate.
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I'm not sure I understand this, what do you mean 'put a charge' on his half? :confused:
 
Is he able to buy out his mortgage completely? I did something similar when I was younger, my parents bought a flat outright and we then had a legal agreement drawn up by a solicitor which basically formed a mortgage between me and my parents. It had a fixed repayment amount, term length etc.

I later part-exchanged the flat on a house, the money for which paid off the outstanding debt to my parents and the remainder was then used for the house deposit. Worked well for all parties, they had a fixed income from my monthly payments and when it was part-exchanged got the remainder back and the equity from the flat became my deposit.
 
I believe he's been on an interest-only mortgage but the prices have gone up so much since he bought it he's probably looking at a profit of £240k should he sell up.
 
Scam said:
Yeah it's tricky. Made a bit unlikely because it would be such a stretch for us to buy even half of it. I'm not sure we'd want to stretch that far for half a house. As amazing as it is.

I guess if either half wanted to sell, we'd both have to. I haven't even thought about the maths but if we bought half and he wanted to sell up in 5-10yrs time then I doubt very much we'd be in a position to buy him out!

I'm not sure I understand this, what do you mean 'put a charge' on his half? :confused:
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10 yrs ago. My OH dad wanted to sell his house.(divorce) We wanted to buy but didn't have a deposit. I called up RBS said purchse price was 140k and we wanted to borrow 125K they assumed we had the rest as a deposit.

The OH mum kept 30k in the house for us. So on sale. Her dad got 70k her mum got 40k and a 2nd charge for 30k was put on the house.

We got a cheque for 15k (left over after the deposit was taken out of the 30k) to do the house up.
 
Interesting. I wonder if stretching ourselves to buy out 50% would be foolish, and a more sensible thing would to part-buy some of it. Maybe 25-30%. That way we're not so open to any forthcoming busts in the market, yet we'd also see some benefit if the prices carry on rising? And we don't need to put in *all* of our savings.
 
before going in on shared ownership, do you need to consider the worst happening to the other party...Would you dad agree to leave you his % in his estate....if not you could end up on a sticky wicket..and even if he would, could you afford the death tax bill.
If ammeniable there are arrangements that go along way to protect two trusting parties from inheritance tax.
 
mattyg said:
Easiest way is to agree a full purchase price. Then get a mortgage for half of it. Your dad then puts a charge on the property for the amount of the other half.

Mortgage company may even look at it with a 50%LTV getting you a decent rate.
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Very good advice.

He means a first legal charge, i.e. any individual or corporation (i.e. bank) lending with a first legal charge over your property has a first call on any funds available from the sale of the property (i.e. they get their cut first). It's very standard and no bank would lend without this, although I am 100% certain a bank lending to you would insist on having a first legal charge, your father could have a second legal charge.

ginjaninja said:
If ammeniable there are arrangements that go along way to protect two trusting parties from inheritance tax.
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Agreed but just be careful what you get into. Typical way this used to be done was holding property in an offshore company but ATED has put a bit of a scupper on that route.
 
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Ok thanks. I think I understand. But does that only apply if he's paid off more than his half of the property? Or am I getting completely mixed up? He's only been paying interest-only..
 
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