generous parent has offered equity. What problems?

moatmeister

Trying to buy an ideally positioned run down house to renovate with a view to being able to accomodate my recently widowed elderly father in a "grandad flat" in the future when he is ready, which isnt yet.

Have mortgage and deposit sorted but their are minor structural probs which have caused the building society to put on an excessive 100% retention. After much discussion and sole searching cant currently see a way round this.

Have investigated long stop completions but vendors will not cooperate. Could probably get bridging loan but building society would not remortgage for 6 months, and could not afford to be tied in to bridging loan for that long.

Cash purchase now seems only sensible option.

Father has offered to help using the equity in his house, about £170k. He is 84 has no mortgage or other dependants, I am only child and stand to inherit eventually.

What would be the maximum we could raise against this?

In principle, and with his blessing could I "transport" my existing mortgage offer for the renovation property which i understand from the lender is portable, onto his house, to raise as much capital as possible from his house but paid for by me?

This would give us a chance to buy the renovation property for cash with a loan secured against his house and payed for by me. We could then do the repairs as required and remortgage again if necessary.

Could this be made to work? What about inheritance tax etc?

Conrad

For him to raise the funds by conventional mortgage will be entirely based on his income level. His age will be a no no for most lenders.

He could transfer his house to you now, meaning the asset is owned by you alone, or perhaps both jointly and raise a remo - but there are many issues, such as his age, the common 6 month rule, his right to reside (no lender will entertain any kind of overriding tenancy right as this impedes repossession) etc.


You could use your mortgage offer to buy his home, but that lenders criteria will not likely allow him to remain on the deeds. He would then give you the cash from the 'sale'.

Otherwise he could get an equity release product from someone such as AVIVA, limited to something like 50% ltv.

As I said to you before, these matters can be long and complex!!

Conrad

Another possibility is bridging on his own home by him, limited to about 50% and costing something like 1.5% per month as an example. Usualy high fees and closing costs though. Despite his equity any bridger will want to excercise much due dilligence as they wont want to be in the position of evicting an 84 year old - imagine the Daily Mail headlines!

Pincher

You buy your father's house with a mortgage,
assuming he does not need to pay CGT.

He now has lots of cash, so he buys the dodgy house in his name,
and upates his will so you will inherit it. Careful with the Principal Private Residence (PPR) stuff. If you have two houses, the Inland Revenue can treat the dodgy house as a second home, then you might have capital gains issues when you eventually sell it. One house each means the dodgy house is your father's Principal Private Residence from Day 1.

Having his own house and over 80 makes him eligible for lots of freebies: free loft and cavity insulation, Warmfront, boiler upgrades, etc. He can also apply for single occupier council tax, which reduces the council tax while the house is renovated. Don't forget to register him at the new address for Winter Fuel Allowance, which is worth £400 for his age. Free TV license (over 75).

Once you have renovated, and the dodgy house is no longer dodgy, you can sell the old family house, paying no CGT, because it has been your PPR. You are free to buy another PPR, while your father keeps the ex-dodgy house CGT free because it is his PPR.

Obviously I disclaim all responsibility for your arrest 10 years later for some tax evasion charge I don't know about, but Vigillant22 will doubtless raise as a possibility.