Discussion:
Private mortgage
(too old to reply)
AnthonyL
2017-02-28 08:23:00 UTC
Permalink
Raw Message
I've moved house and haven't yet sold the previous one, which is owned
outright.

Over the winter my nephew has been living there and now is interested
in buying it but would struggle to get a traditional mortgage due to
th nature of his work.

From my point of view I need some capital and some income to
supplement my pension. With this in mind I wonder what happens if I
go along the lines of saying that payments he makes over a certain
level will go towards his equity in the property. So if he puts a
lump sum of £20k in then he's bought a 10% share for instance. We can
agree a base interest rate and anything paid above that goes towards
equity.

Just looking for some thoughts and ideas before we agree a plan which
most likely will need professional involvement as clearly there will
be tax and other implications.
--
AnthonyL
Ophelia
2017-02-28 09:44:17 UTC
Permalink
Raw Message
"AnthonyL" wrote in message news:***@news.eternal-september.org...

I've moved house and haven't yet sold the previous one, which is owned
outright.

Over the winter my nephew has been living there and now is interested
in buying it but would struggle to get a traditional mortgage due to
th nature of his work.

From my point of view I need some capital and some income to
supplement my pension. With this in mind I wonder what happens if I
go along the lines of saying that payments he makes over a certain
level will go towards his equity in the property. So if he puts a
lump sum of £20k in then he's bought a 10% share for instance. We can
agree a base interest rate and anything paid above that goes towards
equity.

Just looking for some thoughts and ideas before we agree a plan which
most likely will need professional involvement as clearly there will
be tax and other implications.

AnthonyL

===

If you don't get what you need here, try uk.legal.moderated.
--
http://www.helpforheroes.org.uk
Roger Mills
2017-02-28 10:53:25 UTC
Permalink
Raw Message
Post by AnthonyL
I've moved house and haven't yet sold the previous one, which is owned
outright.
Over the winter my nephew has been living there and now is interested
in buying it but would struggle to get a traditional mortgage due to
th nature of his work.
From my point of view I need some capital and some income to
supplement my pension. With this in mind I wonder what happens if I
go along the lines of saying that payments he makes over a certain
level will go towards his equity in the property. So if he puts a
lump sum of £20k in then he's bought a 10% share for instance. We can
agree a base interest rate and anything paid above that goes towards
equity.
Just looking for some thoughts and ideas before we agree a plan which
most likely will need professional involvement as clearly there will
be tax and other implications.
You're going to need legal advice about this. For example, what happens
if you die before he's bought all the equity? Would he have any security
or could your beneficiaries demand that he sell it so that they can get
their legacies?

If you do go down this route, might it be simpler to - in effect - lend
him the money to buy it off you? If (say) you agree that it is worth
£200k and he pays a 10% deposit, you receive £20k capital now and lend
him £180k. He makes monthly payments calculated to pay the interest
*and* pay off the debt over an agreed time period. You get a regular income.

He gets all of the equity straight away but the debt is registered
against the property, enabling you to re-possess it in the case of default.
--
Cheers,
Roger
____________
Please reply to Newsgroup. Whilst email address is valid, it is seldom
checked.
AnthonyL
2017-02-28 12:47:44 UTC
Permalink
Raw Message
Post by Roger Mills
Post by AnthonyL
I've moved house and haven't yet sold the previous one, which is owned
outright.
Over the winter my nephew has been living there and now is interested
in buying it but would struggle to get a traditional mortgage due to
th nature of his work.
From my point of view I need some capital and some income to
supplement my pension. With this in mind I wonder what happens if I
go along the lines of saying that payments he makes over a certain
level will go towards his equity in the property. So if he puts a
lump sum of £20k in then he's bought a 10% share for instance. We can
agree a base interest rate and anything paid above that goes towards
equity.
Just looking for some thoughts and ideas before we agree a plan which
most likely will need professional involvement as clearly there will
be tax and other implications.
You're going to need legal advice about this.
As I just said in the paragraph above.
Post by Roger Mills
For example, what happens
if you die before he's bought all the equity? Would he have any security
or could your beneficiaries demand that he sell it so that they can get
their legacies?
That could readily be catered for in a Will though eg 5 years to sell
or pay up.
Post by Roger Mills
If you do go down this route, might it be simpler to - in effect - lend
him the money to buy it off you? If (say) you agree that it is worth
£200k and he pays a 10% deposit, you receive £20k capital now and lend
him £180k. He makes monthly payments calculated to pay the interest
*and* pay off the debt over an agreed time period. You get a regular income.
Reverse problem of the above would now apply re provisions if I die?
Post by Roger Mills
He gets all of the equity straight away but the debt is registered
against the property, enabling you to re-possess it in the case of default.
But yes the idea has merits and I guess is effectively a "private
mortgage" isn't it?
--
AnthonyL
burfordTjustice
2017-02-28 14:07:30 UTC
Permalink
Raw Message
On Tue, 28 Feb 2017 08:23:00 GMT
Subject: Private mortgage
Date: Tue, 28 Feb 2017 08:23:00 GMT
Newsgroups: uk.legal,uk.finance
Organization: A noiseless patient Spider
X-Newsreader: Forte Free Agent 1.21/32.243
Use one or forever be screwed.

According to the Law Society, as at 31st July 2011, there were 159,524
solicitors on the Roll; which means that since 1981 the total number of
solicitors holding practicing certificates had grown by 206.4% at an
average annual rate of 3.8%. There are two major legal professions in
the UK – barristers and solicitors.
AnthonyL
2017-03-01 12:30:09 UTC
Permalink
Raw Message
On Tue, 28 Feb 2017 09:07:30 -0500, burfordTjustice
Post by burfordTjustice
On Tue, 28 Feb 2017 08:23:00 GMT
Subject: Private mortgage
Date: Tue, 28 Feb 2017 08:23:00 GMT
Newsgroups: uk.legal,uk.finance
Organization: A noiseless patient Spider
X-Newsreader: Forte Free Agent 1.21/32.243
Use one or forever be screwed.
According to the Law Society, as at 31st July 2011, there were 159,524
solicitors on the Roll; which means that since 1981 the total number of
solicitors holding practicing certificates had grown by 206.4% at an
average annual rate of 3.8%. There are two major legal professions in
the UK =E2=80=93 barristers and solicitors.
And of the small, but several, solicitors, I've had contact with more
than a minor percentage have been pretty useless which is why I'm
asking here for thoughts first. When I subsequently talk to one at
least I'll have an idea of whether I'm talking to someone who knows
what they are talking about.

Thanks anyway.
--
AnthonyL
burfordTjustice
2017-03-01 12:44:50 UTC
Permalink
Raw Message
On Wed, 01 Mar 2017 12:30:09 GMT
Post by AnthonyL
On Tue, 28 Feb 2017 09:07:30 -0500, burfordTjustice
Post by burfordTjustice
On Tue, 28 Feb 2017 08:23:00 GMT
Subject: Private mortgage
Date: Tue, 28 Feb 2017 08:23:00 GMT
Newsgroups: uk.legal,uk.finance
Organization: A noiseless patient Spider
X-Newsreader: Forte Free Agent 1.21/32.243
Use one or forever be screwed.
According to the Law Society, as at 31st July 2011, there were
159,524 solicitors on the Roll; which means that since 1981 the
total number of solicitors holding practicing certificates had grown
by 206.4% at an average annual rate of 3.8%. There are two major
legal professions in the UK =E2=80=93 barristers and solicitors.
And of the small, but several, solicitors, I've had contact with more
than a minor percentage have been pretty useless which is why I'm
asking here for thoughts first. When I subsequently talk to one at
least I'll have an idea of whether I'm talking to someone who knows
what they are talking about.
Thanks anyway.
Your peril no peril for those that give you answers.
AnthonyL
2017-03-02 12:20:58 UTC
Permalink
Raw Message
On Wed, 1 Mar 2017 07:44:50 -0500, burfordTjustice
Post by burfordTjustice
On Wed, 01 Mar 2017 12:30:09 GMT
Post by AnthonyL
On Tue, 28 Feb 2017 09:07:30 -0500, burfordTjustice
Post by burfordTjustice
On Tue, 28 Feb 2017 08:23:00 GMT
Subject: Private mortgage
Date: Tue, 28 Feb 2017 08:23:00 GMT
Newsgroups: uk.legal,uk.finance
Organization: A noiseless patient Spider
X-Newsreader: Forte Free Agent 1.21/32.243
Use one or forever be screwed.
According to the Law Society, as at 31st July 2011, there were
159,524 solicitors on the Roll; which means that since 1981 the
total number of solicitors holding practicing certificates had grown
by 206.4% at an average annual rate of 3.8%. There are two major
legal professions in the UK =E2=80=93 barristers and solicitors.
And of the small, but several, solicitors, I've had contact with more
than a minor percentage have been pretty useless which is why I'm
asking here for thoughts first. When I subsequently talk to one at
least I'll have an idea of whether I'm talking to someone who knows
what they are talking about.
Thanks anyway.
Your peril no peril for those that give you answers.
What peril ffs? I originally stated I would get things sorted
professionally. You're not a solicitor as well are you?
--
AnthonyL
Robin
2017-03-02 12:49:31 UTC
Permalink
Raw Message
Post by AnthonyL
I've moved house and haven't yet sold the previous one, which is owned
outright.
Over the winter my nephew has been living there and now is interested
in buying it but would struggle to get a traditional mortgage due to
th nature of his work.
From my point of view I need some capital and some income to
supplement my pension. With this in mind I wonder what happens if I
go along the lines of saying that payments he makes over a certain
level will go towards his equity in the property. So if he puts a
lump sum of £20k in then he's bought a 10% share for instance. We can
agree a base interest rate and anything paid above that goes towards
equity.
Just looking for some thoughts and ideas before we agree a plan which
most likely will need professional involvement as clearly there will
be tax and other implications.
Like some others I think you should think hard about the "failure modes".

In particular "I need some capital and some income" does not sit happily
with "would struggle to get a traditional mortgage". Can you cope with
him failing to make payments - better than with, say, a commercial
letting? And would the family connection mean repossession was a
realistic option if he failed to make payments?

If you can accept the risks then one of the options you have in mind
looks to be very much like a bog-standard shared ownership scheme of the
sort used by housing associations, but with a mortgage from you.
--
Robin
reply-to address is (intended to be) valid
AnthonyL
2017-03-03 13:13:45 UTC
Permalink
Raw Message
Post by Robin
Post by AnthonyL
I've moved house and haven't yet sold the previous one, which is owned
outright.
Over the winter my nephew has been living there and now is interested
in buying it but would struggle to get a traditional mortgage due to
th nature of his work.
From my point of view I need some capital and some income to
supplement my pension. With this in mind I wonder what happens if I
go along the lines of saying that payments he makes over a certain
level will go towards his equity in the property. So if he puts a
lump sum of £20k in then he's bought a 10% share for instance. We can
agree a base interest rate and anything paid above that goes towards
equity.
Just looking for some thoughts and ideas before we agree a plan which
most likely will need professional involvement as clearly there will
be tax and other implications.
Like some others I think you should think hard about the "failure modes".
In particular "I need some capital and some income" does not sit happily
with "would struggle to get a traditional mortgage". Can you cope with
him failing to make payments - better than with, say, a commercial
letting?
For my own needs any sale/income proceeds are a bonus as I have enough
to live on from other sources. But if someone handed me a nice 6
figure lump sum I can think of things to do with it!

Commercial lettings by all accounts have their downsides but one
advantage I see in him buying equity (ie any payments beyond an agreed
threshhold) would cope better with the following scenario, wouldn't
it?
Post by Robin
And would the family connection mean repossession was a
realistic option if he failed to make payments?
I see that as more of an issue if I was to sell him the house with me
as a creditor of some sort than if he were buying in and I retained a
(hopefully reducing) share.
Post by Robin
If you can accept the risks then one of the options you have in mind
looks to be very much like a bog-standard shared ownership scheme of the
sort used by housing associations, but with a mortgage from you.
I'll look the housing association schemes up, thanks for that.
--
AnthonyL
Roger Mills
2017-03-03 19:50:32 UTC
Permalink
Raw Message
Post by AnthonyL
Post by Robin
Post by AnthonyL
I've moved house and haven't yet sold the previous one, which is owned
outright.
Over the winter my nephew has been living there and now is interested
in buying it but would struggle to get a traditional mortgage due to
th nature of his work.
From my point of view I need some capital and some income to
supplement my pension. With this in mind I wonder what happens if I
go along the lines of saying that payments he makes over a certain
level will go towards his equity in the property. So if he puts a
lump sum of £20k in then he's bought a 10% share for instance. We can
agree a base interest rate and anything paid above that goes towards
equity.
Just looking for some thoughts and ideas before we agree a plan which
most likely will need professional involvement as clearly there will
be tax and other implications.
Like some others I think you should think hard about the "failure modes".
In particular "I need some capital and some income" does not sit happily
with "would struggle to get a traditional mortgage". Can you cope with
him failing to make payments - better than with, say, a commercial
letting?
For my own needs any sale/income proceeds are a bonus as I have enough
to live on from other sources. But if someone handed me a nice 6
figure lump sum I can think of things to do with it!
Commercial lettings by all accounts have their downsides but one
advantage I see in him buying equity (ie any payments beyond an agreed
threshhold) would cope better with the following scenario, wouldn't
it?
Post by Robin
And would the family connection mean repossession was a
realistic option if he failed to make payments?
I see that as more of an issue if I was to sell him the house with me
as a creditor of some sort than if he were buying in and I retained a
(hopefully reducing) share.
Post by Robin
If you can accept the risks then one of the options you have in mind
looks to be very much like a bog-standard shared ownership scheme of the
sort used by housing associations, but with a mortgage from you.
I'll look the housing association schemes up, thanks for that.
One thing to bear in mind is that if you continue to own it - or prt of
it - you will be subject to CGT on any increase in value of your share
since it's not your main residence.
--
Cheers,
Roger
____________
Please reply to Newsgroup. Whilst email address is valid, it is seldom
checked.
AnthonyL
2017-03-09 14:04:23 UTC
Permalink
Raw Message
Post by Roger Mills
One thing to bear in mind is that if you continue to own it - or prt of
it - you will be subject to CGT on any increase in value of your share
since it's not your main residence.
A few months ago I was (informally) talking to an accountant and when
I mentioned I'd lived in the house for 33 yrs he said I'd never live
long enought to pay CGT. I didn't at that time pay a lot of attention
to how he arrived at that.
--
AnthonyL
Robin
2017-03-04 07:15:17 UTC
Permalink
Raw Message
On 03/03/2017 13:13, AnthonyL wrote:
<snip>
Post by AnthonyL
Commercial lettings by all accounts have their downsides but one
advantage I see in him buying equity (ie any payments beyond an agreed
threshhold) would cope better with the following scenario, wouldn't
it?
Possibly. I haven't worked through the options in detail. I only had
in mind the general point that if he doesn't pay the only way for you to
get your money may be to evict him. That seems to me true whether he is
your tenant, your mortgagor or (in a shared ownership scheme) both.

<snip>
Post by AnthonyL
I'll look the housing association schemes up, thanks for that.
I'm not sure how easy it'd be to find a lawyer familiar with the details
of such schemes. (And FTAOD I'm neither lawyer nor familiar with them.)
But for a general idea you might have a look at

http://www.lease-advice.org/advice-guide/shared-ownership-leases/
--
Robin
reply-to address is (intended to be) valid
David Woolley
2017-03-04 10:13:09 UTC
Permalink
Raw Message
Post by Robin
If you can accept the risks then one of the options you have in mind
looks to be very much like a bog-standard shared ownership scheme of the
sort used by housing associations, but with a mortgage from you.
As far as I can tell, shared ownership is actually constructed as a long
lease with a high ground rent. There may be special provisions, e.g.
for tax, relating to housing associations (registered social landlords,
or whatever the current term is). I presume any change in the share is
done by a deed of variation on the lease, which is a conveyancing
operation, so potentially expensive.

Since the abolition of MIRAS, I'm not sure that there is much difference
between a mortgage and any other loan formally secured on the property.
Robin
2017-03-04 11:23:26 UTC
Permalink
Raw Message
Post by David Woolley
Post by Robin
If you can accept the risks then one of the options you have in mind
looks to be very much like a bog-standard shared ownership scheme of the
sort used by housing associations, but with a mortgage from you.
As far as I can tell, shared ownership is actually constructed as a long
lease with a high ground rent. There may be special provisions, e.g.
for tax, relating to housing associations (registered social landlords,
or whatever the current term is).
There's an example in the link I posted this morning in reply to the OP.
But I think it's a bit harsh referring to it as "ground rent" when the
occupier has not paid the capital value of a long lease. ISTM fair to
describe it as rent for the share not owned - albeit usually with
provision for rent rises built in.
Post by David Woolley
I presume any change in the share is
done by a deed of variation on the lease, which is a conveyancing
operation, so potentially expensive.
Depends what you consider "expensive". AIUI many solicitors would
handle a staircasing purchase for c.£600.
Post by David Woolley
Since the abolition of MIRAS, I'm not sure that there is much difference
between a mortgage and any other loan formally secured on the property.
I was using "mortgage" to mean a legal agreement by which a sum of money
is lent on the security of property, land etc. I am sorry I did not
think it necessary to say so. But it's along time since I've seen
mortgage used in other senses, such as the actual conveyance of property
by a mortgagor to a mortgagee as security for a debt.
--
Robin
reply-to address is (intended to be) valid
Loading...