A mortgage but only for a percentage of a property, possible?

[nictry]

Sligtly odd one this but am considering freeing up some equity in a mortage free house by allowing a family member to purchase a % of the property and wondering if this is actually possible ie would they be able to get a mortage this way.

To clarify if they were to take £100k mortgage (probably the max they could borrow) and the house is worth £250k but they would only 'own' 50% (80% LTV effectively) of the house and we would retain ownership of the other 50% but receive the £100k funds released on the mortgage?

It seems that 'tenants in common' and getting a deed drawn up to show the divided ownership would potentially work but the question is how would the lender work with this, would they agree/accept such an arrangement, would we also need to be named on the mortgage (but not have our income used for the mortgage itself)?

Hope this is clear enough for some potentially knowledgeable folks to comment? I know there are risks but as this is family and we would still get a legal document drawn up I am less concerned about that side of the problem?

[Brighty]

Lender won't allow it. They'll want an interest in the whole house, they can't repossess half a house.
Only way to do it is a deed saying you have 50% equity, but then you would both need to be on the mortgage 50/50, they stop paying, you are liable.

I assume you don't live there? Will the other guy? You'll either both need to live there with a residential mortgage, or get a btl mortgage, but then neither of you can live there. Can't get a half and half

If it's not your main residence, then you need to calculate if you'll owe CGT.

[nictry]

So you are saying i would have to live there to be a party on a residential mortgage if the family member lived there fulltime and was the other name on the mortgage?

I thought parents coudl take joint mortages with their kids to help them buy a house so that seems a bit odd?

[Brighty]

Not 100% sure on that, specialist area that, best find a good broker

[reggie747]

So you are saying i would have to live there to be a party on a residential mortgage if the family member lived there fulltime and was the other name on the mortgage?

I thought parents coudl take joint mortages with their kids to help them buy a house so that seems a bit odd?

I'm not sure he's saying you have to live there but the parent/kid example surely makes the parents liable to pay if the kid drops the ball perhaps ?

[Brighty]

Think the normal route for parents is for them to gift the deposit or be a guarantor on the mortgage, they're not usually a part owner and on the mortgage in their own right. Speak to a broker, or post the question on the mse mortgage forum, lots of brokers get on there
http://forums.moneysavingexpert.com/...splay.php?f=15

[nictry]

I'm not sure he's saying you have to live there but the parent/kid example surely makes the parents liable to pay if the kid drops the ball perhaps ?

Which is fine as its our house in the first place - the issue is whether the mortgage could just be on their income and not ours.

[Brighty]

Which is fine as its our house in the first place - the issue is whether the mortgage could just be on their income and not ours.

As part owner, you would definitely need to be on the mortgage, you'd just need to find a lender happy with you not living there

[julian2002]

It's certainly possible on one level otherwise there would be no such thing as shared ownership properties, whether this is available to the general public and, if so, what hoops you'd have to jump through are probably questions best asked of a specialist broker.

[draftsmann]

My experience of seeking specialised lending for clients in connection with various estate and tax planning exercises is that for anything that doesn't fit in a standard "box" the number of lenders reduces significantly and costs increase significantly; the latter because of perceived increased risk and or because lenders prepared to offer something non-standard will often be closer to the private banking than the retail end of the spectrum.

Definitely go to a specialist mortgage broker, and while about it I'd suggest seeking advice on any tax and succession issues that might arise.

[Johnnie]

I don't think any of the usual lenders (except possibly the tertiary lenders - avoid) would lend with only security based on a share in the house. It's simply too risky as they couldn't guarantee getting possession if things went wrong. They would require security in the whole house meaning that the other owners - in whom the legal estate is vested - would have to sign the mortgage, effectively charging their share as security for payment of what was due.