Parents suggest selling house to my brother and I interest free

[jessicasa]

Question: does this sound like a fair deal for me? Would it ever make sense to purchase a home on an interest free loan if I am not living in it and not getting any rental payments from it?

Essentially this boils down to my parents acting as a bank providing interest free loan repayable in installments over time. All this would be formulated through a deed of sale drawn up by a notaire to ensure it is legally watertight.

Parents: X, brother: Y me: Z

Y lives in the house for the foreseeable future.

Process: X sell' to Y AND Z for 240k (note Y and Z would negotiate how to deal with fees/tax = approx 20k; but as advantage of usage falls to Y this could be fully or proportionally absorbed by Y) and put in place an agreement of loan with following terms:

0% loan and repayment amounts and split as negotiated between X, Y & Z: For example purposes: Y repay 1,000 (2/3rds) and Z 500 (1/3rd) per month. 1,000+500 = repayment of 1,500/month

Therefore term of the loan becomes .....1,500 x 160 months = 13.33 years; Y (2/3) & Z (1/3) own a share of the flat each at term.

All value add on future sale to be retained by Y (2/3rd) and Z (1/3rd)

If house gets sold before end of 13.33 year term, say 100 months, Y retains 100k of the capital spent (the 1k payed month) + 66% of added value/loss of sale) and Z retains 50k + 33% of added value.

Note: the house is in France where houses have increased in value by 5-7% the last 20 years. Inflation does not have to be factored in as they're generously giving us an interest free/inflation free loan.

Would I be better off just keeping my money in stocks? How can I negotiate to make it more worth while for me? Could my brother pay me a rental payment of 1/3 of the true value of the rental? Or would getting him to pay for all taxes and construction fees make it more than worthwhile for me alone?

Thanks

 

[ofugha]

@jessicasa

advantage of usage falls to Y

Y repay 1,000 (2/3rds) and Z 500 (1/3rd) per month

All value add on future sale to be retained by Y (2/3rd) and Z (1/3rd)

So Y is living rent free in a shared ownership position. Pretty cushy. Z is getting fucked.

Would I be better off just keeping my money in stocks?

Probably. Low fee index funds at least.

Here's an important hypothetical: what happens if Y never wants to sell? What happens if Y wants to sell early?

You have all the problems of shared ownership in addition to no advantage of abode or rent, with family mess mixed in. Bad deal, would not take.

 

[resjudicata]

@jessicasa In such an arrangement I would suggest that 1/3 of the market rate rent (in reality, family rate) be paid by Y to Z.

After all, Z will own and be paying for 1/3 of a property that they are getting zero use from.

 

[jessicasa]

@resjudicata Ok. Let's say Y paid the whole £1500 monthly interest free monthly payment for the house, and Z keeps a 33% stake in all of those £1500 payments (effectively Y paying Z £500 a month rent). Once fully paid off, Y owns 66% of it, having lived in it for 13 years, and having paid for it in it's entirety and Z owns 33% having "not paid for any of it".

In this scenario wouldn't Z still be worse off than if the parent, X, kept the house until death which would leave both Y and Z with 50% each?

 

[bdiddy]

@jessicasa Losing your right to first time buyer benefit?

 

[fallonsbechtel]

@jessicasa If you are French, it is much more complicated than that, you need to also take into account the inheritance law, if you get the « nue propriété » or not …

 

[filu63]

@jessicasa Are you a homeowner? If not then be aware that you'll lose your first time buyer benefits such as the stamp duty discount.

 

[faith590]

@jessicasa Y has got to pay rent or you are losing out ....but all seems too complicated

 

[rubyannbing]

@jessicasa What happens when you want your money out of that “investment” to buy your own place? Or for literally anything else - but your brother’s happy with the setup and doesn’t want to/can’t buy you out?

Sounds like a long stressful process to evict your brother and force a sale - not even sure what the rules are in France. Sounds expensive and like you might fall out over that one.

 

[miracle66]

@jessicasa Inflation / French house prices does have to be factored in as the money you're paying towards it each month could go towards a better investment instead

 

[amotherslove]

@jessicasa Seems unfair for Y. Presumably Y has to pay for their own rental/ mortgage where they live plus subsidise Z so they can have an interest free 33% discount subsidy on where they live

 

[rhapsodyoftheheart]

@amotherslove You have X and Y backwards. Y would continue living in the house. Z won't live in the house and indeed apparently lives in the UK.

 

[tomb523]

@jessicasa I'd suggest you say Y must save a specific amount each month to pay for any necessary upkeep costs required that are a consequence of them living their, as there's no reason you should pay for degradation of the property from their use of it, and Y pays X a below market rate amount of money for Y's use of X's property (30%?)