Hi,
This is a strange one I think. I have a close friend who is mid 30's and still renting. He is in a steady, pensionable but not great paying (circa 40k) job. I have been encouraging him to get on the property ladder over the last few months as I believe the market is close to bottoming out. He says he wouldn't get a mortgage as the banks have really tightened up and at 40k pa he wouldn't be able to afford a house. He is currently renting at 500pm.
I have money in the bank, earning (not very much) interest, and I have been thinking about investing in property. So, I have suggested to my friend that we could buy a house together, with me putting half in cash and him getting a mortgage towards his half, under the following general conditions :-
1. I would allow the whole house to be used as collatteral against his mortgage.
2. I would have no further liability towards his mortgage other than my half of the house (i.e. if value fell so much it didn't even cover his mortgage, thats down to him).
3. Property would be two bed, he lives in it with a tenant, I get tenant rent.
Thats the gist of it. As I see, it is a way for him to get started, using my half of the house as collateral to get a mortgage. Obviously we'd have to get legal agreement re selling, death etc.
To my surprise, he doesn't quite see this as a good opportunity, for the following reasons :-
1. He feels that bank will want us to be joint mortgage holders, and will view my cash half as just a joint deposit. So I would be liable for his mortgage in event of default (beyond the resale value of the whole house).
2. He doesn't see why I would get the tenants rent. His point here is somewhat confused, mainly centred on the rent being possibly more than I am earning on the money on deposit.
3. He seems to think that the bank, beyond wanting my half of the house, will also want some or all of my current property as collateral. Surely not!
In general he is hinting that the deal isn't generous towards him - which is obviously his prerogative and I've gracefully stopped talking about it He works in financial services so I am assuming he has some insight in this, but for the life of me I can't see how it is anything but a good deal for him - he gets the whole house as collateral against his half mortgage, gets him on the property ladder at just the right time.
What dya think? Am I inadvertently ripping him off? Would the banks even allow a deal like this?
This is a strange one I think. I have a close friend who is mid 30's and still renting. He is in a steady, pensionable but not great paying (circa 40k) job. I have been encouraging him to get on the property ladder over the last few months as I believe the market is close to bottoming out. He says he wouldn't get a mortgage as the banks have really tightened up and at 40k pa he wouldn't be able to afford a house. He is currently renting at 500pm.
I have money in the bank, earning (not very much) interest, and I have been thinking about investing in property. So, I have suggested to my friend that we could buy a house together, with me putting half in cash and him getting a mortgage towards his half, under the following general conditions :-
1. I would allow the whole house to be used as collatteral against his mortgage.
2. I would have no further liability towards his mortgage other than my half of the house (i.e. if value fell so much it didn't even cover his mortgage, thats down to him).
3. Property would be two bed, he lives in it with a tenant, I get tenant rent.
Thats the gist of it. As I see, it is a way for him to get started, using my half of the house as collateral to get a mortgage. Obviously we'd have to get legal agreement re selling, death etc.
To my surprise, he doesn't quite see this as a good opportunity, for the following reasons :-
1. He feels that bank will want us to be joint mortgage holders, and will view my cash half as just a joint deposit. So I would be liable for his mortgage in event of default (beyond the resale value of the whole house).
2. He doesn't see why I would get the tenants rent. His point here is somewhat confused, mainly centred on the rent being possibly more than I am earning on the money on deposit.
3. He seems to think that the bank, beyond wanting my half of the house, will also want some or all of my current property as collateral. Surely not!
In general he is hinting that the deal isn't generous towards him - which is obviously his prerogative and I've gracefully stopped talking about it He works in financial services so I am assuming he has some insight in this, but for the life of me I can't see how it is anything but a good deal for him - he gets the whole house as collateral against his half mortgage, gets him on the property ladder at just the right time.
What dya think? Am I inadvertently ripping him off? Would the banks even allow a deal like this?
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