Me and my dad are buying a house together and I want to know if it’s a good idea or not

[strivingforgodsglory]

Hey all! Basically me and my dad have seen a decent property selling at auction that we like, he is currently paying a boat load in rent and can’t really afford it (I’m in a flat I own outright). The basis of us buying it is that we go half for all payments of buying it (deposit, mortgage, legal fees etc), he lives in it while paying half the mortgage until that’s paid off (10 years) and then lives in it for free, but once it’s paid off it gets transferred over to me and he lives there rent free. The guide price is £45k bY, we’re hoping for the lower 40s. I just thought I’d g. everyone’s opinions and gauge whether other people think it’s good or bad idea. TIA

 

[robert424]

@strivingforgodsglory A few things from me

• Probably better to get a mortgage solo and have your dad pay rent. You can work out an alternative arrangement after it’s paid off.
• ensure if for whatever reason he is unable to pay rent, you can still cover it
• regardless of the state of your relationship, draw up a tenancy agreement, it protects you both.

Side note: are you sure the property you’re looking at is even mortgageable? Most auction properties are not eligible for a mortgage. Most auctions also require upfront funds and do not accept a DIP as proof of funds.

 

[shelbylynn92]

@robert424 Genuine question but how would a tenancy agreement help his dad? How much longer could he stay there with an agreement than without?

 

[byhimforhim]

@shelbylynn92 A tenancy agreement means that OP can't suddenly decide to ask for more money, or kick their dad out unexpectedly (either because they want more money renting it to someone else, or because they've met a partner and want to move from their apartment into the larger house.)

 

[shelbylynn92]

@byhimforhim But from what I understand, tenants are getting no fault evictions and rent raises all the time. I dont see what difference an agreement really makes to them.

 

[blevins]

@shelbylynn92 No fault evictions are a bug feature of Assured Shorthold Tenancies (ASTs). There are other types of tenancy agreement. I believe it would be possible for OP and their dad to draw up a tenancy that does not allow for no-fault evictions using the Housing Act.

 

[byhimforhim]

@shelbylynn92 Tenancy agreements mean that rent raises can only occur at specific pre-defined intervals, and usually have a limit built-in on how much that raise can be.

i.e. the landlord can't decide to raise it by 200% the day before rent is due…

 

[mike7377]

@byhimforhim I’m which case ops original plan of joint mortgage is a better option. Love how people on here are always trying to overcomplicate things

 

[juliaraine]

@robert424 A lot of buy to let mortgages won’t allow you to rent to a family member, because you’re likely to charge them less rent and it poses a risk to the mortgage repayments.

 

[toomanythoughts]

@juliaraine How do they control that?

 

[juliaraine]

@toomanythoughts I don’t know. But it’s a very common term in the mortgage agreement. You generally can’t rent to friends and family if you have a buy to let mortgage

 

[kookie80]

@toomanythoughts They look at the tenancy agreement.
If they’ve got the same surname it’s blatantly obvious.

Think about the remortgage in the future as well, so say you got away with it for a purchase for a family member, when you come to remo they can deffo see the tenancy. In the meantime you’ve committed mortgage fraud / broke the conditions of the initial mortgage offer.

Banks have been lending mortgages for a long time, have seen everything and are smarter than you/me. Customers get away with stuff all the time, but it does catch up with them.

However

There are btl lenders that will allow a family member to reside it’s called a regulated btl in the industry.

However 99% of the lenders that do regulated btls do an affordability assessment on income, not rental stress testing - on the grounds that you’re not going to kick your family member out if they miss rent.

Source: I support a network of advisers, used to be a mortgage adviser.

 

[mackdaddyswole]

@kookie80 KYC - he has indicated he is buying it joint with his father so there is no mortgage fraud nor will there be any tenancy agreement for the first 10 years.

 

[mackdaddyswole]

@toomanythoughts Given that he's buying it joint its a moot point, It will not be a BTL mortgage

 

[slmill1987]

@robert424 Any reason for #1? Op will have to pay tax on the rental income as his dad is not a 'lodger'

 

[psalmist_j]

@slmill1987 If op isn’t living in it his dads not a lodger regardless?

 

[natsu]

@strivingforgodsglory Auction guide prices are set low to get people through the door. The price then gets bid up. It's not like an estate agent's asking price. You are bidding up from there, not down.

Your suggestion that you'll get it for low 40s seems very unlikely. A true valuation is perhaps 20% over the auction guide price, so you might get it mid 50s.

Also make sure you fully understand all the fees you'll need to pay. Again with an auction, they are substantial. They essentially pass you the cost of sale (usually borne by the seller) and all the legal work (which you would ordinarily pay your own solicitor for) but you'll still need your own solicitor, and they probably chose a premium solicitor for the legal work you need to pay for.

 

[kevin__huang]

@natsu I have regularly seen properties on Homes Under the Hammer guided in their 30s and then going for 120K+.

Happened also to a friend of mine recently on a property at a guide price of 50K, it went for 200.

 

[mayadanielle]

@natsu I spent weeks extremely excited to win my dream place in Islington that was only 300k at auction... Unfortunately I didn't have the £1.4 million to keep up.

 

[sakuramochi]

@strivingforgodsglory If it were me I'd probably just get the mortgage in my name and rent it to my dad. It'd be a little more expensive, depending on where it is. But safer