Buying a House From My Parents

SSF_Bina

OK, the long story short is that my mum and dad own their own home (3 bed, semi-det, attached garage, front and back garden) in an area which undergoing significant development and investment.

6 years ago my mum left and my dad bought her out of the shared mortgage legally.

Now he has contacted me to say that he does not earn enough to cover the mortgage and his living costs and is going to be forced to sell. His pride prevented him from telling me sooner and he is desperate enough to consider one of those "buy your house and rent it back to you" schemes which post adverts through the letterbox.

Now, I easily have enough disposable income (and will forever) to pay the mortgage on his behalf. However my credit rating is so poor that I could not actually get a mortgage with the bank to buy the house officially.

The is currently left to me in my fathers will and since I am Armed Forces I will never need to live there again.

My questions are thus:

1. Is paying the £535 mortgage for my father a good investment since I will inevitably inherit the home in the future?
2. Am I allowed to pay the mortgage on behalf of someone from a legal standpoint?
3. Can my father transfer ownership of the house over to me so that he is in fact a 'tenant' and I take on his mortgage at the same rate of interest?
4. How can my father negotiate a lower rate of interest than he is currently offered by Intelligence Finance

I am sorry for the detailed first post, but financial education does not really run in my family and this is the first home (we) have ever owned.

My best friend advised me to pay the mortgage on behalf of my father because from an economic standpoint he has actually negotiated a much better rate than I could ever have as a 27 year old first time buyer.

Any help appreciated, any at all.

poppysarah

What's changed in your dad's circumstances? Has he recently lost his job?

Work out why he can't afford the house before you consider offering to help.

RAS

Hi

1. Is paying the £535 mortgage for my father a good investment since I will inevitably inherit the home in the future?

Will you - what if he goes into a home, or remarries? or you fall out and he leaves it to the cat's home.

2. Am I allowed to pay the mortgage on behalf of someone from a legal standpoint?

If you want to , yes.

3. Can my father transfer ownership of the house over to me so that he is in fact a 'tenant' and I take on his mortgage at the same rate of interest?

See some of the comments below re rent.

4. How can my father negotiate a lower rate of interest than he is currently offered by Intelligence Finance

What is his (and your) credit rating like?

Things to consider.

1. If your father goes into a home and the house is still in his name, then social services will come after the equity to pay his nursing home fees.
2. If he transfer the property to you and continues living there, he will only get help with the rent if you charge a full market rent, otherwise it is considered a contrived tenancy But as a single person, given what is happening to LHA from April 2011, there is no way he will get enough LHA to pay full market rent on a 3 bedroom property.
3. If he transferred the property and then goes into a home, the Social Services might view it as deprivation of assets.

What age is dad?
What is the house worth?
How much is the outstanding mortgage?
What is your credit rating really like (have you checked in the last 6 months)

Has dad thought about getting a lodger in to one room who could pay up to £370 per month wihtout dad having to pay tax on it?

Jowo_2

The Shelter website provides good information to home owners about how to avoid arrears and how to prevent repossession, including various government schemes for those who have suffered a loss of income.

Any LHA application where the property that has a tenant in it that's a close relative of the landlord gets close scrutiny to investigate whether or not it is a contrived tenancy, set up to exploit the housing benefit system. Google 'contrived tenancy' so you understand what the local council will check and which ones are considered legitimate.

Do you actually want to become your dad's landlord? This means that any tenant/landlord disputes can ruin the personal relationship. It also means you are responsible for repairs, compliance with masses of legislation and you may have to evict him for arrears....

Perhaps you can just pay his mortage for a few months until he sells it the conventional way for its full market value via an estate agent rather than lose 20% if its value to quick sale companies that have the reputation of demanding a big drop in price just before completion. You could get a solicitor to draw up an agreement for your father to repay you from the equity when it sells. That seems to be a way that you can help him at low risk to yourself without ending up having a business relationship with him as landlord/tenant.

SSF_Bina

A few elaborations:

My dad is 56 years old
He works full time and claims no benefits
His job has announced a massive wage cut
He does not have the option of moving firms (for several reasons but they paid for his working license and he cannot move for 3 years)
His total outgoings (before food) are £1100 per month
His wages now total £890 per month
Before his current job he used to be a carpet fitter and decorator (too old now) but he can fix up the house himself in my absence do repairs better than I ever could.

Also my daughter has a dedicated room in the house as do me and my wife. The home (which I grew up in) also sits in my local community where all of my friends live and I return there at least once a month.

I hope this information is useful. He is not averse to the idea of a lodger but the lodging market in our town (non-commutable, no cities within 50 miles) is non existent.

Everybody owns their own homes mostly.

RAS

Since all of you are already effectively lodging with your dad, what do you contribute by way of rent, CT and insurance shares?

SSF_Bina

I don't lodge. I have my own house in Germany with the Armed Forces.

RAS

SSF_Bina wrote: »

Also my daughter has a dedicated room in the house as do me and my wife. The home (which I grew up in) also sits in my local community where all of my friends live and I return there at least once a month.

If you have dedicated rooms in the house, then you have been using space that he might have considered letting over the last few year even if you were not there.

Or perhaps he might have considered selling up and down-sizing before he got in a mess if he had not been making provision for your family?

jockosjungle

Surel;y he isn't tied to the company if they massively cut his wages?

Nothing to stop you helping your father out, how much is left on the mortgage and how many years are outstanding? If he cannot afford it now, will he be able to when he retires

R

poppysarah

His total outgoings (before food) are £1100 per mont

how much is mortgage?

Lodgers - but you use the rooms.

Either move in with him and help him out or let him rent the rooms. Look up rent a room scheme.

tyllwyd

Edited to say - sorry for the angry smilee above, I don't know how it got there and it doesn't seem to let me delete it!!


I am totally unqualified but my understanding would be ....

SSF_Bina wrote: »

1. Is paying the £535 mortgage for my father a good investment since I will inevitably inherit the home in the future?

As someone else said, there are circumstances where you may not inherit the home, so you need to think of that money as a gift to your father that you may - or may not - get back in the long term.

SSF_Bina wrote: »

2. Am I allowed to pay the mortgage on behalf of someone from a legal standpoint?

I can't see why not - but again, it would be a gift to that person. Perhaps it might give you some beneficial interest in the house, I'm not sure.

SSF_Bina wrote: »

3. Can my father transfer ownership of the house over to me so that he is in fact a 'tenant' and I take on his mortgage at the same rate of interest?

If the mortgage is in his name, I can't see how you could do that. He'd need to sell the house to you and you get a new mortgage in your own name.

SSF_Bina wrote: »

4. How can my father negotiate a lower rate of interest than he is currently offered by Intelligence Finance

Well, he could try shopping around for a better deal, but if his income is £200 per month short of what he needs, he's going to struggle to get a good deal.


If you think of the house as a base in the UK for you and your family, you might think it is worth contributing a certain amount to your dad's finances, because otherwise you'd have to rent somewhere to stay when you come back. Somewhere to stay for three people for a weekend once a month, say, wouldn't come for free.

Or if your dad can't cope because he has debts, has he tried talking to a debt charity like CCCS or PayPlan (have a look at the Debt-free wannabee board).