/ Hypothetical Property Question
A & B are 67 and 70 years old and live together and have 50-50 ownership (no mortgage) of their property, currently worth circa £250k
B has a son C age 40. He has equity of circa £50k and could raise a mortgage of £75k. For various reasons B wishes to move in with A & B. Thus the three of them could potentially purchase property i.r.o £375K but A & B are too old for a mortgage.
Just wondering if all three can have equal shares in a £375k property with C as sole morgagee?
So is your real question can C get a mortgage where the security is a house owned by someone else and what are the likely terms and conditions?
> So is your real question can C get a mortgage where the security is a house owned by someone else and what are the likely terms and conditions?
Yes, except that all three would move into the £375k proprty with equal ownership.
Also, as a disinterested outsider, sounds like a classic recipe for a car crash. IMHO.
Why is it different from a man getting a mortgage when his wife is going to live there? As long as A and B sign disclaimers postponing their interest to that of the mortgagee, there shouldn't be any problem.
> Also, as a disinterested outsider, sounds like a classic recipe for a car crash. IMHO.
Families do all sorts of stuff which isn't commercially recommendable. It's true they do sometimes make work for my sort, I guess.
I assumed the OP meant why can't they sell their existing houses, raising equity of 300k, and then C raise a mortgage for 75k and they buy a house together for 375k. I can't see any reason of principle why not.
Oh god, give them fake names!!! I can't cope with alphabetised people...!!!!
Assuming a willing lender, it's easy; the trick is that legal ownership (the name(s) on the land register) can be different from beneficial ownership (=who gets what when the house is sold). BUT A and B are at risk because the lender can repossess if C defaults. And there is a cost involved because the arrangement can't be done properly without a trust deed, which should be drafted by a solicitor. If A and B are willing then either:
1. the legal title has to be held by C. C becomes sole legal owner (hang on, don't panic, it gets better), and has sole liability for the mortgage. BUT he will have to hold the house on trust so that A, B and C have whatever shares they want (presumably A and B have a third each of the value of the house, whereas C gets a third less whatever is due on the mortage). A and B would need to protect them selves by ensuring that the trust deed stated that C could not sell without their agreement (although of course the lender can).
2. All three buy the house as joint legal owners. Then they mortgage the house; they need a trust deed, exactly is in method 1, because (as set out above) what they want to achieve is not equal thirds of the value of the house-less-mortgage-debt, which is what they will have if they don't set out the precise arrangement they want. I think this arrangement is less likely to be acceptable to a lender because of A and B's age.
Going back to scenario 1, then, if C defaults on the mortgage the lender will sell. Let's assume, because I can only do easy numbers, that the house now sells for £390k, the mortgage debt plus costs of sale are £75k: of the net sale proceeds (315k, after paying mortgage and costs) A and B get £130k each and C gets £55k.
Tell me if I haven't explained that clearly and I will have another go! :-)
The other concern would be what happens when A or B pops their clogs or wants their equity - again, this would worry a lender.
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