Mortgage Advice

Kaded

Evening all,

Newbie post, so play nice

My parents are having trouble keeping up with mortgage repayments, their house is worth around £130,000 and they have an outstanding mortgage of £65,000.

I'm currently renting elsewhere, I've never dealt with mortgages so not that clued up. Is it possible for me to get a mortgage for the £65k to buy my parents out for 50% of the house?. I could then pay my mortgage at much lower monthly repayments and they could afford to pay me rent equivalent to the mortgage cost. Would I need any kind of deposit? would it matter that i wouldn't be living there as they'd own 50%?.

Basically, I have no clue about what is and isn't possible. So any generic advice would be much appreciated

Thrugelmir

Firstly, I would see if you could help them sort out their own finances, before considering a share of the house.

Kaded

I can't sort their finances out for them, they simply can't afford their mortgage, my dad earns below 15k a year, my mum used to earn over 20k, she got made redundant last year and used her insurance to cover the mortgage cost, that comes to an end in July, she is struggling to get a job for similar money and is currently looking after old people for around 200 a week.

The only solution is either selling up and downsizing, or part selling to me.

Raggs_2

When you say below 15k, how much below? And is the 200 a week before, or after tax? If after, and not too much below. It should be within the realms of affordability. If there are other debts, or their lifestyle doesn't fit their income, this is a different matter.

200 take home is 12k a year, add that to 14k, and you have 26k (but with extra tax allowances than a single person would have). To have the equivalent of that, you'd need 30k+ (you don't get as much tax allowance), and probably, assuming low rent of 200 a month, closer to 33k a year.

I don't know about a deposit, but they should be able to get a much better deal than you, since they have LTV of 50%, which should mean even a 5 year fix of around 4.5% or less. So if they can afford to pay you rent, the equivalent to the mortgage costs, why can't they just pay the mortgage?

Add to that, would you guarantee you'd get the rent, I know I'd struggle to ask my parents for it if they missed a month here and there. And also you'd run into possible CGT issues later on down the line.

Basically, they should be able to get a better mortgage deal than you, and they're earning enough to pay it (in the eyes of a mortgage company, and from your own statement).

Kaded

Just to clarify a few things...

My dad is self employed, his salary ranges from £100 to £200 a week after tax.

My mum earns around £200 a week after tax.

They are both nearly 60.

Their mortgage repayments are 900 a month.

They can't remortgage for a cheaper amount.

They have no other debts, apart from the usual mobile phones etc.

They dont live a high lifestyle, all they do is work.

The idea was i'm young and on a good wage, much better than theirs combined. I could get a mortgage over a longer period for lesser monthly payments. They'd set up a DD for the rent, failing that they're my parents, i'm not going to kick off if they can't pay for a month as my salary would cover the cost.

Kaded

Can you tell me a bit more about tax allowances? I'm not sure if they benefit from any of these? or are you simply talking about the rate of tax paid and i'm getting confused

Raggs_2

Just the basic rate of tax paid, and £6,475 allowance each (you'll only get that once). Nothing fancy or special.

In short, they should be able to get a better deal than you could, and should be able to cover the costs.

A 10 year repayment at 4.5% would be 684.55 a month (less than your mothers income). At 20 years (depends on their ages of course), only 416.41 a month.

A more sensible option, if they are still stuck, (other than you buying half the house), would be for you to just give some money to them each month (maybe write up in the will that the value should be offset in your inheritance, assuming you aren't sole inheritor). Since they can get a better mortgage deal than you (most likely).

Kaded

They can't get a better deal, they both have very poor credit ratings, they both have health problems, they've remortgaged a few times, they've tried.

I would much rather buy the outstanding mortgage balance and receive 'rent' from them, me giving them money outright is a complete last resort.

I don't see how them remortgaging for 10 years (as thats the maximum they can get) is more cost effective in terms of monthly expenditure than me mortgaging over 25 years.

xyellowx

kaded
dont take this the wrong way but are you sure they are being honest with you about no other debts?
asuming they had taken out a 25 year mortgage the house is worth 130k they owe 65k and are aged 60 (somthing not right)
like i said dont take it the wrong way just trying to help you

Kaded

They have had debt problems in the past, and have had to remortgage several times (i believe 3 in total) to release equity.

I believe the only actual debt they have is a credit card with a 2000 balance (just spoke to my mum).

They became over reliant on my mums wage and haven't got any contingency plans. My mums even talking about selling to one of these companies that let you rent it back!

ps - I wouldn't take any genuine attempts to help the wrong way, its appreciated

xyellowx

speak to your bank or a independent mortgage advisor providing you have a deposit of £8500 upwards you should be able to sort yourself a mortgage with a better rate than what your parents can get
if you can afford to i would charge rent to mum and dad and use it to make overpayments