1 year, 9 months ago
via credit-qna.com
Is it a good idea to buy a house under a co-ownership arrangement?
My nephew in the U.K. has started to part buy and part rent a house through a co-ownership arrangement with a housing trust.
He is paying rent and a mortgage] on a 1/4 of the freehold with the option to purchase the rest at a later date.
It does sound a bit complicated and I'm wondering what would happen if he wants to sell.
He is paying rent and a mortgage] on a 1/4 of the freehold with the option to purchase the rest at a later date.
It does sound a bit complicated and I'm wondering what would happen if he wants to sell.
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M$2 Answers
In reviewing this type of home ownership, you have to remember that I am in the United States and your nephew is in the UK so terms and legalities may be different. I couldn’t find anything that seems to be the same thing as you are describing as a “co-ownership arrangement”. I currently have a contract for deed on the house I am living in and it sounds very similar. The house I pay monthly installments for is the house my mom owned for many years, paid off the mortgage, had a stroke and ended up in a nursing home for over three years. Well you can imagine how expensive nursing homes cost and the bottom line is that public aid had to come in and help pay her bills. So when she passed away, they put a lien on her house for the money they paid for my mom’s medical bills.
I rented the home (it was given to me in her will) but the property tax was over $2,200 a year and I couldn’t keep up with them. Bottom line was a man that buys and sells property bought the house for the property taxes that were due. He gave me the opportunity to still live in the house, pay him monthly installments and then the house would be mine when I paid it off. This appears to be the same thing that your nephew is going through with the part buy/part rent agreement.
To me it was a godsend. In my financial condition, I wouldn’t have been able to be approved for a regular mortgage for the house so by the owner offering me a plan to pay it to him and then retain ownership, it was wonderful. I am responsible for the property taxes and insurance, but those amounts are included in my rent/mortgage payment so it works for me.
I think the main thing your nephew needs to be aware of is his co-owner. The man that I pay has done this type of thing for a living for years so I knew it wasn’t a scam. You nephew wants to make sure that what the owner is doing is legal and that he does hold the true title to the property. Additionally, with a contract for deed, only a short time is required to cancel the contract in case of default. A buyer only has 60 days from the date they are notified if they are in default to correct the default or the contract can be revoked. Usually with a mortgage company and foreclosure, the buyer can have up to six months.
So as long as your nephew checks out all the little details, he will be fine.
I rented the home (it was given to me in her will) but the property tax was over $2,200 a year and I couldn’t keep up with them. Bottom line was a man that buys and sells property bought the house for the property taxes that were due. He gave me the opportunity to still live in the house, pay him monthly installments and then the house would be mine when I paid it off. This appears to be the same thing that your nephew is going through with the part buy/part rent agreement.
To me it was a godsend. In my financial condition, I wouldn’t have been able to be approved for a regular mortgage for the house so by the owner offering me a plan to pay it to him and then retain ownership, it was wonderful. I am responsible for the property taxes and insurance, but those amounts are included in my rent/mortgage payment so it works for me.
I think the main thing your nephew needs to be aware of is his co-owner. The man that I pay has done this type of thing for a living for years so I knew it wasn’t a scam. You nephew wants to make sure that what the owner is doing is legal and that he does hold the true title to the property. Additionally, with a contract for deed, only a short time is required to cancel the contract in case of default. A buyer only has 60 days from the date they are notified if they are in default to correct the default or the contract can be revoked. Usually with a mortgage company and foreclosure, the buyer can have up to six months.
So as long as your nephew checks out all the little details, he will be fine.
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M$
I am in agreement with the other answer - if you are in financial straits "co-ownership" is a godsend, a way to purchase a house when you have no other option. It's certainly complicated though, and will effect when he goes to sell.
If he could buy a house outright in his name only he'd be better off, unless that is not an option for him
If he could buy a house outright in his name only he'd be better off, unless that is not an option for him
You can leave an optional "tip" with Mahalo's virtual currency, Mahalo Dollars. If you are asking a difficult question that might require some research, or if you'd like a wide variety of feedback, a higher tip often leads to more answers to your question.
M$
That does sound like a godsend for you, it must have been a huge relief, my nephew is dealing with a large housing association which sells many new starter homes in this way, so I'm sure they are legit.