Mortgage with a friend questions

Mysticalp

Hi all!

First poster here. I have a friend who has a permanent job but the salary is not great. She is asking me to get a join mortgage so she can ask for a bigger mortgage but she would pay the mortgage herself. Her idea is to get the two of us together and then when she receives a sum of money that her parents are going to receive in one year to take me out of the mortgage.

I just want to know besides the risks of her not being able to pay (which to be honest I believe it's not really a problem) what kind of issues would I have doing this and how this could affect me in the future.

Thanks!

Grumpypants

Outside of the obvious that you could get stuck in a pile of debt without any asset, the big one is you would lose your first time buyer status. So when you come to buy would need a 20% deposit not 10%.

Mysticalp

Do you know if that would also affect me if I move to a different country inside Europe? Not sure how that works...

mickuhaha

Don't do it. Unless you're going to co own the property and let them buy you out when they get the money. Otherwise you will be liable and have no say in regards what happens with your liability. For example. You co sign they get the house. They never get the insurance coverage for the house. House Burns down . Now no house and huge debt . They don't want to pay it so they decided to declare bankruptcy. Now your on the hook for full mortgage with no asset. If your signature is going on anything your responsible 100 per cent for anything that can and will go wrong.

mickuhaha

Mysticalp wrote: »

Do you know if that would also affect me if I move to a different country inside Europe? Not sure how that works...

You are required to declare debt anywhere in the world if you are going for a loan anywhere.

Mysticalp

OK, this sounds more risky than I thought

mickuhaha wrote: »

You are required to declare debt anywhere in the world if you are going for a loan anywhere.

Sure, I meant if I would still lose the first buyer conditions in other countries after my friend moves the mortgage to be completely in her name. She is supposed to receive an amount of money in one year that would allow her to do that

KAMG

Why doesnt she either just wait the year for her parent's money or else get them to join her on mortgage now. I don't think id do it if it were me and im coming from a financial background.

KAMG

Why doesnt she either just wait the year for her parent's money or else get them to join her on mortgage now. I don't think id do it if it were me and im coming from a financial background.

Wheety

Don't do it. She can wait a year.

Uriel.

I wouldn't touch it with a barge pole OP.
You're effectively liable for the debt. What happens if she can't or decides not to continue to pay the mortgage. You'll either have to stump up for it or face consequences from the banks seeking repayment - bad credit rating etc. If house value drops and ends up in negative equity you will be out of pocket. You'll also screw yourself in terms of financial capacity if you are not taken off the mortgage on time (or at all). Legal costs (including coming off the mortgage) will also be incurred.

The situation is fraught with risk for you for no gain. Apart from all the financial and legal issues you'll have your friendship under significant strain rather easily. Would avoid like the plague.

colm_mcm

Run away, quite fast.

sportsfan90

Not a chance OP

LessOutragePlz

Let's put it this way OP:

If a person on the street approached you and asked you to be a joint mortgage holder on a property and told you that they'd buy you out next year with a lump sum from their parents.

Would you do it?

Only difference in your situation is it's a friend asking.

I wouldn't even do it for my own brother or sister.

Mortgage debt is something that you are legally bound to repay so there is no way of escaping it. So if things go bad for your friend you'll be stuck with that debt until it is repaid.

holliehobbie

Op have you even talked to a solicitor about this? Also I don't understand why the friend can't wait a year.

Mysticalp

Thanks a lot everyone. Definitely not looking like the best idea. There's a lot of good info here

KAMG wrote: »

Why doesnt she either just wait the year for her parent's money or else get them to join her on mortgage now. I don't think id do it if it were me and im coming from a financial background.

Her parents are too old to get a mortgage. They have properties to cover for it though. Banks don't seem to accept those as warranty to let her have a bigger mortgage

Uriel. wrote: »

I wouldn't touch it with a barge pole OP.
You're effectively liable for the debt. What happens if she can't or decides not to continue to pay the mortgage. You'll either have to stump up for it or face consequences from the banks seeking repayment - bad credit rating etc. If house value drops and ends up in negative equity you will be out of pocket. You'll also screw yourself in terms of financial capacity if you are not taken off the mortgage on time (or at all). Legal costs (including coming off the mortgage) will also be incurred.

The situation is fraught with risk for you for no gain. Apart from all the financial and legal issues you'll have your friendship under significant strain rather easily. Would avoid like the plague.

never thought about that one. That's really a big risk

December2012

What would you gain?

As far as I can see, it's all risk for you.

bilbot79

The financial crash was full of stories of unusual debt partnerships gone wrong. Myself and a mate talked about going in together on a place because they were too expensive, so glad we didn't!

handlemaster

Mysticalp wrote: »

Hi all!

First poster here. I have a friend who has a permanent job but the salary is not great. She is asking me to get a join mortgage so she can ask for a bigger mortgage but she would pay the mortgage herself. Her idea is to get the two of us together and then when she receives a sum of money that her parents are going to receive in one year to take me out of the mortgage.

I just want to know besides the risks of her not being able to pay (which to be honest I believe it's not really a problem) what kind of issues would I have doing this and how this could affect me in the future.

Thanks!

Do not do this. There are going to be big problems with this.

Ultimate Seduction

Debt can easily split up families never mind friends. Let em wait the year. Crazy that you're even considering it.

beauf

Really bad idea.

Grumpypants

If there was any upside to consider like your friend let you live rent free until the mortgage was bought out, or gave you a lump sum. But from what i can tell the friend wants you to take on lots of risk, screw your future buying potential and you get nothing for it.

No brainer really.

JJJackal

This deal will cost you money imo eg larger deposit. If she cant buy you out your own "first" house will be classed as a "second" house - thus definitely higher deposit and potentially higher interest rate.

There is no clear advantage OP from the information you have presented - there is very high risk and definite cost to you.

I do not think you would be seen as a first time buyer in any country after this purchase (as you wouldnt be a first time buyer)

the_syco

Mysticalp wrote: »

Do you know if that would also affect me if I move to a different country inside Europe? Not sure how that works...

If she loses her job, you'll have to pay her mortgage, or you'll owe the bank the money. All the while you may be paying rent at another house.

Don't do this under any circumstance, it's such an awful idea.

frecklier

When she tries to take you off the mortgage, you will both need to hire a solicitor. And she will have to pay stamp duty on half the value of the house. Currently going through this with a relative. Ours is very amicable, has still taken a year so far.

Ursus Horribilis

To paraphrase my grandad, only join your friends in the rosary. This is the sort of arrangement that's grand unless someone's circumstances change. Someone loses their job or suffers a pay cut. One or the other of you meets someone and the tangled issue of overnight stays rears its ugly head. One of you wants to sell up but the other doesn't. If you look back through this forum you'll find threads from people who've done it and are now in bother. It's probably just about OK with a family number. With friends, run.

wildwillow

Don't even consider it. Great points and advice from other posters.

Brego888

It's admirable that you want to help your friend but it makes really bad business sense.

Purple Mountain

If she gets sick and can't work, what happens?
Or she even gets pregnant and has to survive on maternity benefits every week?

This is not something that a friend should ask another to do. So don't do it.

Oral Surgeon

Firstly as everyone has already said... Don't even think about it!!!

Secondly, lose that "friend", she obviously thinks that you are a soft touch and someone to be taken advantage of....

You state that you don't think that there'll be any issue with her paying the mortgage... if shes that flush then she should have the money to go it on her own....
If she is about to come onto some money then let her wait for it, or borrow off this guaranteed money or have it gifted to her early....

If you want you can spin her a yarn about having an old student loan still outstanding and that your inclusion may not actually be helpful....

Me, I'd just laugh at any suggestion like this......

Good luck

Ursus Horribilis

Yep, there's real stench of a stroke being pulled here. Why lose your first time buyer's status and risk your own financial future over someone else's problem? Why can't she upskill if she is of a mind to buy a house but is a bit short? Why can't she wait another year for this sum of money and save in the meantime? Does this lump sum even exist?

TallGlass

Out of interest. How long have you known this person?

It's all seems very scam like.

As they say on Dragons Den, 'sorry but it's a no from me on this one.'

ghostdancer

despite the fact that it would probably be OK, there's literally no upside to this for you that I can see, other than humouring your friend.

as everyone has pointed out, you'll be liable for anything that goes wrong, and if she gets sick/pregnant/whatever, then a "well she's looking after the repayments" won't cut it at all.

plus you lose your first-time buyer's status (assuming you still have it), so this plan will cost you financially down the line.



how/why are the parents going to receive money in a year? you say they have properties already, so let them re-mortgage or sell them or whatever if they want to raise capital now to give to her.