Buying Parents Home to pay off thier debt and get me on property ladder??

LSC123

Can anyone give me any advice?

My parents (for various reasons) have fallen way behind in Mortage repayments and there have been recent threats of repossession.

I am still renting (away from haome and its impractable to move home). I have been think on ways to help them out recently and have come up with the following idea..however as i have not had any previous property experience i don't know how viable it is.

My plan is to buy the property from my partents (privatley), not at market value (c£120,000) but at the value of thier debt. This would allow my to get a mortage of 60k which works out at around £350pcm or £250 pcm (intrest only) Which i can afford.

If this is viable how do we go about it, i have spoken to my parents and they seem to agree with this proposal?

Any comments/help would be greatfully received

L

lynzpower

will they pay you rent?

Do you envisage living there at any point ( you say its impractical for you to live there, what do you foresee changing?)

When will you get the property back, after they have passed on? Without being macabre old age can last a hell of a long time.

Acc72

I don't know the details - but you are looking to buy an asset worth £120k for £60k ... could be a few problems.

An alternative (could) be to get a loan for £60k give this to your parents and your parents to then gift you the house ..... need to check the details.

Are your parents going to live in the house rent free forever ?

Who is responsible for any repairs / maintenance ?

Will you also be living there ? - if no, can you afford to rent/buy elsewhere also, if yes are you planning to live there forever ?

Not to mention if you need capital in the future for whatever reason - are you going to make your parents homeless ?

What if you meet a partner who wants the property / money - will you sell ?

What if you marry and then divorce - your ex-wife would be entitled to half of the property and may force you to sell.

There are literally hundreds of implications of such a decision.

Of course you think that such events would never apply - by everbody thinks that ...... I am sure all of the above (and more) has happened to somebody somewhere ....

Srry to be gloomy when you are only trying to help your parents ......

Dead_Eye_Jones

yeah some good questions above. Seems to me its a good idea if you can afford it and can carry on with your life.

There are some obvious very sticky situations that could arise if you dont actually have this money to 'give away'. It also kinda leaves your parents with nothing and in dire financial security - wont they just get themselves into another mess? Will you be able to bail them out again? You could be the one who ends up with nothing whilst you folks are living it up in a house you pay for...!

Robert_Sterling

How old are you?
How old are your parents?
What is your marital status?
etc etc


If someone is in debt then in general it is not a good idea for them to sell an asset for far less than the asset is worth.

.... and as it says in an easrlier post there are many possible consequences which you might not have considered.

Gorgeous_George

If/when house prices crash, you could be in a very difficult position.

Imagine, house now worth £60K, mortgare of £60K at 8% or more. #

Be very careful.



GG

ginger_nuts

the other option for you to borrow £60000 but to put the house names .Both yours and your parents .This gives your parents security .

sharkmark

I am in similar position and may well soon have to step in and bail out the in-laws - It all depends on your income as to whether you can afford to do this -I suppose in the end the asset will pass to you and at that time the house will probably be worth significantly more at that time.

An alternative to all of this is instead of buying the house for 60K wouldn't you rather just loan them some money in short term to cover repayments - they may get back on their feet in year or so - not really sure it's worth buying the whole house etc as tax may become an issue.

Gorgeous_George

sharkmark wrote:

I suppose in the end the asset will pass to you and at that time the house will probably be worth significantly more at that time.

...but, you must consider that the house could be worth significantly less.



GG

msw_2

We are also in a similar position. there are a lot of issues to consider most of which have been mentioned above. If you are planning to rent out the home to your parents to cover your mortgage then be very careful as it is highly unlikely that Housing Benefit would cover the rent in these circumstances.

I looked into mortgages a bit and found that we would not be able to get a residential mortgage for the property as we would not be living in it and apparently most buytolet mortgages have restrictions against a relative living in the property. I think halifax were our only option as they did some weird version of a residential mortgage which covers this situation. You also need to think about Capital Gains Tax and your ability to raise another mortgage should you wish to buy another property in the future. I would also suggest you look at the reasons why your parents have gotten into this situation in the first place and think carefully about what consequences their behaviour could have on you in the long term should you go ahead.....we didn't in the end...

Lazy_Runner

Sorry to be morbid but I suspect that if you buy the property at less than market value, the Inland Revenue would be very interested in the transaction.

Also this may lead to inheritance tax issues either for your parents or yourself.

I am not sure about any of this so suggest you check with a tax expert.