Q My brother and I have inherited a house and we each own 50% of it. He currently lives there with his partner and intends to do so for quite some time. I would like to sell him my 50% so that I have money to buy my own property or do with it as I wish. The value of the house is roughly £80,000, so I would be entitled to £40,000 in cash.
My brother is under the impression that he has to take out a mortgage on 50% of the property value to give to me, and so would need at least 10% of the mortgage value as a deposit for the bank who supplies the mortgage.
Can you tell me, is this the correct procedure? We are struggling with this as the house has now been in our possession for eight months and he is making no progress as he believes he has to raise £4,000 first and foremost. Personally, I think he has been misinformed and that there are other ways in which I can access the money. KV
A Your brother has been misinformed as he doesn’t need to raise a cash deposit of £4,000. He is right in thinking that the most lenders will lend is typically 90% of the value of a property but he is not looking to borrow that much. He is also right in thinking that the only way he can raise the cash to pay you your £40,000 without selling it outright is to take out a mortgage of 50% of the value of the property. But he doesn’t have to pay cash – apart from any possible fees to arrange the loan – to the mortgage lender because his 50% share is effectively what he is putting down as a deposit on the mortgage. However, he might want to consider taking out a mortgage of more than £40,000 so that he has the cash to pay legal fees, mortgage fees and Land Registry fees.
The fact that your brother has such a large ‘deposit’ in the form of his 50% equity in the property means that he’ll have access to competitive interest rates. For example, if he wanted a fixed-rate mortgage, he could get a two-year fixed rate of 1.49% with a £475 fee from Accord Mortgages or a three-year fix with the same lender of 1.99% but a £975 fee. Alternatively, a five-year fixed rate could have a rate of 2.44% at Virgin Money and a fee of £995.
If he’s happy to go with the flow and doesn’t mind coping with possible interest-rate rises, for a fee of £999, he could secure a mortgage with a rate of 1.04% above bank base rate so currently 1.54% with the Nationwide building society.
Muddled about mortgages? Concerned about conveyancing? Email your homebuying and borrowing worries to Virginia Wallis at virginia.wallis.freelance@theguardian.com
