Sharing Equity with Parent's House??

SnowyPea

Hello everyone,

Just curious if anyone can help with an idea me and my father are working up.

I currently have a mortgage with my husband (both just wed and in our early 30s) and we live in an area that's not very desirable or great for schools.

My parents live just down the road in a lovely part of the world that's fantastic and is where we want to end up. It's got great schools and is very desirable.

But because of the property market, and because we can't afford anything in said town, we're stuck. I'm sure we'd have no problem selling our home but it would definitely be in negative equity by now. Only very slightly though.

In the meantime, my parents are in a lovely big family home and want to move to France. My father's thinking he could share the equity with us - as in, we sell our home and then get a mortgage for about £150,000 of my parents home - thus freeing up some capital for them to be able to buy a property in France. But then also, having somewhere they can always return to in England.

It's just an idea but how could we go about it? Are there mortgages out there that do this? Or schemes?

It would work wonders all-round and really resolve everyone's property headaches.

Thanks, SP

00ec25

previous posts on the same theme have all concluded no lender will give a mortgage on only part share of private house

your parents would hve to sell you 100% of the house, you can perfectly legally pay them less than its current "value" so that you use a mortgage to fund your payment to them

but if you cannot raise a mortgage for the full value of the house then they cannot sell you only a share if you need to borrow on a mortgage to fund that share

richard2212

I am not sure if this is on the same point but as a parent I want to give my son £50,000. I am thinking of equity release on my home - although I could cash in ISAs to the required amount. So what is best? Go for equity release or cash in ISAs?

Richard_Webster

previous posts on the same theme have all concluded no lender will give a mortgage on only part share of private house

your parents would hve to sell you 100% of the house, you can perfectly legally pay them less than its current "value" so that you use a mortgage to fund your payment to them

but if you cannot raise a mortgage for the full value of the house then they cannot sell you only a share if you need to borrow on a mortgage to fund that share

Agreed, but the house could be put in all four names with all four as borrowers in return for payment of say half value by the younger couple and they take on the actual mortgage responsibilities in practice. Older couple would have to trust younger couple not to default etc. However I don't know if such a mortgage would be obtainable.

SnowyPea

Thanks for all your feedback. I thought it was too good to be true.

My father did mention about selling the house for a fraction of its true value and then working something out.

But, to be honest, having read many of the posts on here of people struggling to secure a home now that the credit crunch has hit, I think we're very fortunate as we are.

Going to just wait for the market to recover, wait until we have money saved up so we can move. Do things the sensible and patient way.

Thanks again, SP

Rockporkchop

Would it work if your parents remortgaged their own house for 150k and you sold your house, moved in to their house and paid for the 150k mortgage and all bills as if it was your own house?

They would still own the house for now but something could be sorted out down the line if it works out.

00ec25

richard2212 wrote: »

I am not sure if this is on the same point but as a parent I want to give my son £50,000. I am thinking of equity release on my home - although I could cash in ISAs to the required amount. So what is best? Go for equity release or cash in ISAs?

to be blunt equity release is about how much your son will inherit when you die and will not affect your current standard of living, spending your ISA is about you reducing your std of living now in terms of less income now and also never having that money to fall back on if you need to pay a big bill

only you can really decide which matters more to you, help your son now at no financial loss to you, but reducing his inheritance; or you living the rest of your life without access to a £50K cushion and its income.

Depends on your age, your Inheritance Tax position, your partner's position, possibility you may need to fund a care home by selling the house and whether you son will be able to pay your bills when you are older?

00ec25

Rockporkchop wrote: »

Would it work if your parents remortgaged their own house for 150k and you sold your house, moved in to their house and paid for the 150k mortgage and all bills as if it was your own house?

They would still own the house for now but something could be sorted out down the line if it works out.

risky - the parents would no longer be living in the property so would have to pay capital gains tax when they "sorted it out" down the line

getmore4less

The first problem is you will need to resolve the current mortgage negative equity.


Your parents could give you the house and you get as big a mortgage as you can, pay of the debt and give the parents the rest.

Keep the payment below stamp duty level.

Splitting the house equity does open up some CGT issues if they move out.

Will they trust you with the full value of the house.
(note the risks of seperations etc)

Keeping it in the family might be the best option if they may want to come back and it is something you would like to live in now.

SnowyPea

Hello again... Thanks again for all your thoughtful replies!
It's great coming on here and seeing what is out there. Getting all these fantastic pearls of wisdom!!

I think it's best we stay where we are for now. My parents probably need as much equity release as they can get, therefore they're best selling their house and moving fully to France. Lots of great holidays in the pipeline anyway!

Just got to keep saving, paying things off and enjoying the home we already have and love.

I wish sometimes it wasn't such a human thing to want more of what we haven't got.

It wasn't so long ago - three years ago in fact - when I used to dream and dream and dream about owning my own place. It didn't matter where it was!

Got to keep remembering that. xx