Best thing to do in this situation...

Ste1605

Hi
My partner and I have been offered my partners father's house. The thing is he has a couple of years left on the mortgage at about 80k. He wants to move to a cabin on a piece of land he owns elsewhere. We would pay for this at about 40k.
What are our options?
I'm thinking of buying the house at an inflated price of about 200k. The house would be worth about 160 I think. The idea would be that the father of my partner would give us 80k cash back after the sale which we would use for refurbishments.
Other option is pay the 40k for the cabin out of savings. Transfer the mortgage somehow. Get a personal loan for the refurbishments.
Apologies on the long thread and hopeful for some good advice.

limnam

There's a number of problems.


But the first stumbling block is a bank won't give a mortgage for more than the current market value of the house

Ste1605

Isn't the market value really the price someone is able/willing to pay. Similar houses are going at the 160/170k Mark. We have been approved for a lot more than we would require so paying back would not be a problem.

limnam

Ste1605 wrote: »

Isn't the market value really the price someone is able/willing to pay. Similar houses are going at the 160/170k Mark. We have been approved for a lot more than we would require so paying back would not be a problem.

No. it's what the valuer who the bank send out to value the house says its worth.

Ste1605

So we buy the house at what the valuer determines and the net difference from that we would look to get back from her father.. Are there any implications we need to think off?

Lolle06

Ste1605 wrote: »

So we buy the house at what the valuer determines and the net difference from that we would look to get back from her father.. Are there any implications we need to think off?

If similar houses go for 160/170k then the bank would loan up to 90% of this if you are FTB‘s, otherwise 80%. The valuer won’t take into account what you would pay (or overpay) for it.

Furthermore, I can see a problem arising when it comes to getting planning for the cabin type accomodation for 40k - more than likely this type of cabin would not comply with planning regs.

Ste1605

We are FTB so will be looking for 90%. The cabin will be built on a different site and would not be on our property. This would be not something that will overly concern us as once the 40k is given we are confident the father of my partner will be fine. I'm more concerned with what we need to understand fully in this situation.

Lolle06

Ste1605 wrote: »

We are FTB so will be looking for 90%. The cabin will be built on a different site and would not be on our property. This would be not something that will overly concern us as once the 40k is given we are confident the father of my partner will be fine. I'm more concerned with what we need to understand fully in this situation.

Okay, so your partner’s father would sell you the house no matter if planning is granted for his new dwelling and he might have to up his budget of 40k for it considerably?
Well, in that case you‘d need 10% deposit and legal fees + stamp duty.
Let‘s say, the valuer would set the house value at 170k, you would get a mortgage of 153k. Your deposit would be 17k + around 5k legal fees/ stamp duty.

dubrov

Why not go to the bank and borrow 160k plus 40k for refurbishment. They should give it if the refurbishment will increase the value of the property to 200k and you can afford it.

The father in law can then gift 40k after the transaction if he likes

Ste1605

Just to simplify the father will want 120 net to clear debt and build the cabin. Everything over that will be gifted back to us. As we would need 60-80k we are trying to figure out the best way to get this hence the mortgage idea off 200k. Not sure max limit of a personal loan BTW.

Diemos

Keep finances and family seperate.
Look at how complicated this situation is and nothing has happened yet and everyone is rowing in the same direction.

Save everyone a lot of heartache and say thanks but no thanks.

Askthe EA

I think you need to think long and hard about this. Family and money arent often compatible, even if you assume they will be.

jimmycrackcorm

The simple solution is to but the house at the value it's worth. Then the father in law can sorry it his cabin and gift you whatever he wants.