Parents buying new house and I am buying theirs.

KatieA

Hi, My parents are going to buy a new house next year, their current house is worth approx £ 130,000. When they move they want to start a brand new mortgage for the same amount. Their current mortgage is £ 250 a month for the next 10 years, They would like me to rent the house for £ 500 a month which would pay the £250 a month mortgage on their house and give the something towards their new house, the main goal in this is that when I save up enough money for a mortgage deposit, I can then buy if off them at a reduced rate and they can pay the rest of their new mortgage off. I would like to know if any mortgage companies offer some way of me paying the £ 250 off for the next 10 years to build up as a deposit and paying my parents £ 250 for rental if you like, then when the original deposit is paid I start my new mortgage off for the difference and my parents get the money back for the house by me buying it. My partner and I currently earn £ 30,000 a year before tax and both have excellent credit ratings only no deposit Your replies are appreciated.

CloudCuckooLand

You need a deposit to get a mortgage.

If your parents wish to keep both houses in their names, and rent 1 to you, that's not impossible, but would need sufficient equity in the old house to convert into a deposit for the new house. Are they on Interest Only, £250 seems low...

Might be able to port the current mortgage to the new place, depends on the product/lender/equity.

'Let-to-buy' could provide a mortgage for the old place, for your parents to keep it, rent it out, and release the equity. But would change the rate applicable to the current house, so your maths iro £250/£250 would no longer apply.

Not sure this helps. Might be simpler to save hard for a year and do it the old-fashioned way...with a deposit of your own.

KatieA

Hi, it's not interest only, they bought the house for around £ 65,000 12 years ago, if they paid the mortgage off now they would own it outright. I was hoping the facts my parents own it would give me a way of using this to my advantage as my parents would like.

The old house would still be in their name even if I was paying the £ 250 mortgage and rental of £ 250 that way they could use the old house as back-up for the new knowing that once they sold it to me the new mortgage would then be paid off and I would have paid £25,000 + of the old, giving me 20% ownership. Alternatively if we got a loan of £ 25,000 and paid off my parents mortgage and they transferred say 20% of the house ownership to me they could then get a new mortgage based on the fact that they own 80% of another house. I prefer paying the mortgage for them though as it means I don't have to pay any interest on a new loan... I hope this makes sense and thanks for your help.

getmore4less

KatieA wrote: »

Hi, it's not interest only, they bought the house for around £ 65,000 12 years ago, if they paid the mortgage off now they would own it outright. I was hoping the facts my parents own it would give me a way of using this to my advantage as my parents would like.

The old house would still be in their name even if I was paying the £ 250 mortgage and rental of £ 250 that way they could use the old house as back-up for the new knowing that once they sold it to me the new mortgage would then be paid off and I would have paid £25,000 + of the old, giving me 20% ownership. Alternatively if we got a loan of £ 25,000 and paid off my parents mortgage and they transferred say 20% of the house ownership to me they could then get a new mortgage based on the fact that they own 80% of another house. I prefer paying the mortgage for them though as it means I don't have to pay any interest on a new loan... I hope this makes sense and thanks for your help.

How are they going to buy this new house?

I just don't see where the money is coming from.

How much is the new house?
How big is their deposit.
How big a mortgage are they getting?

KatieA

getmore4less wrote: »

How are they going to buy this new house?

I just don't see where the money is coming from.

How much is the new house?
How big is their deposit.
How big a mortgage are they getting?

Their new mortgage is £ 130,000, they won't have any deposit, however they do own the other house which if anything happens I would presume they would have to sell to pay off the new. Thanks

getmore4less

KatieA wrote: »

Their new mortgage is £ 130,000, they won't have any deposit, however they do own the other house which if anything happens I would presume they would have to sell to pay off the new. Thanks

You can't get 100% mortgage these days so if they are buying the place for £130k they will need some deposit.

KatieA

I thought they may have been able to broker a deal seeing as they own their own house practically. Thanks anyway

getmore4less

KatieA wrote: »

I thought they may have been able to broker a deal seeing as they own their own house practically. Thanks anyway

they can by increasing the mortgage on the first house to raise the deposit


It might be easier for you to just buy the first place at a reduced price
so in effect have a gifted deposit, but more than the mortgage so they have a deposit for the new place.


Then the options are they port the existing loan(if portable) and top up or just pay it off and get a new one.

Time for an broker to have a look at the options and see if they can find lenders that will meet the criteria.

if you went 3* salaries thats £90k on £130k so 70% LTV

frees up £25k+ for the new £130k purchase 80% LTV parents salaries enough to support a loan of £105k?

CLAPTON

how much is the new house?

laurel7172

It seems like a very complicated way of doing things-and an expensive way for them to fund your deposit (paying interest on £130,000). Also-you realise they're liable for tax on the rent you pay them, and if they aren't careful they'll receive no tax relief on the mortgage for the house they're in? You need some proper advice. Seriously.

If your parents want to help you, could they fund your deposit out of their equity by taking out a slightly larger mortgage on their new home? You could then pay that back at £250 a month, allowing them to overpay the mortgage and clear the extra as soon as possible.

phlash

There is also inheritance tax issues wound up in here.