Taking on Parents Mortgage

marks77

Deleted as post had some inaccuracies regarding parents affordability....!

TonyMMM

More information required ....your income, deposit ?

Are you going to be living in the house ? Are they still going to be living in the house ?

What sort of mortgage do they have , On what terms (rate & time to go) , repayment ? Interest Only (with what repayment vehicle) ?

marks77

They are on interest only......Staying in property - term ended and will go onto repayment terms....

I earn 30K have about 3k deposit.

holly_hobby

Will YOU be living in the property as your main residence ?

Holly

GMS

Buying the property at undervalue from your parents should not be an issue for the lender subject to solicitors confirming no further interest in the property etc.

Your issue will be your parents continuing to reside. You may find lenders objecting to this and wanting confirmation of where your parents will reside upon completion.

sazzmorris

GMS wrote: »

Your issue will be your parents continuing to reside. You may find lenders objecting to this and wanting confirmation of where your parents will reside upon completion.

I am absolutely shocked about that comment!

originalmiscellany

Why Sazzmorris?

GMS

sazzmorris wrote: »

I am absolutely shocked about that comment!

How do you mean? Shocked in what way?

originalmiscellany

I am shocked too, but that's because I have just sat down on an exposed electric wire!

marks77

They will still be living there.....

holly_hobby

Few issues to consider ...

1. I assume from your figs that there are/will be no IHT issues here (i.e parents total estate will not exceed nil rate band on death), if there is or you suspect there may be, you have a problem, as this is in essence a "gift with reservation" by your parents (i.e in respect of discounted pch price of 70/160), and PET regs won't apply whilst they continue to benefit from the gift.

The issue will your parents continuing to reside post sale is with HMRC on death, rather than a lender (who I am not aware object to parents selling their home to their issue and continuing to reside there - as long as the mortgagors maintain the payments of course). So estate planning advice is reqd if you suspect IHT issues will rear their head in the future.

2. Deprevation of assets - this is in relation to the future requirement of any state funded long term care provision that may be sought. The property will be treated as if the transfer of ownership did not occur. You may want to consider effecting some long term care provision to counteract this.

3. CGT - if the property has not acted as your main residence at anytime pre its sale, CGT is chargeable on the total gain made between pch of the asset & its value on disposal (less annual cgt allowance). This can be mitigated somewhat if the property is used as a main residence at any time pre-sale, by the application of owner-occupier & annual cgt allowances & poss lettings allowance dependant on future previous circs on sale).

4. If you will not reside in the property - as the individuals living in the property are close relatives/parents, I think you should be ok for a normal residential mge (no AST reqd).

In any event, your parents will normally be required to sign a consent to vacate disclaimer. (standard industry practice for those resident, aged over the age of 17, but not party to the mge - and nothing to worry about)

Also please be aware that your being party to a mge (that does not drive a rental income) will affect your future borrowing capacity. If you wish to pch your own personal home your income will have to support all borrowings. (i.e this would apply if you intend to reside with parents from outset, but later want to branch out on your own so to speak).

5. If property is to be your main residence -as a FTB there will currently be no stamp duty, as you are under the nil band threshold for FTBs (250K upto March 2012).

6. You will need a lender who will accept family related discounted pch price as a whole - and not require any secondary monetary deposit by yourself - there are lenders about who will help - seek the assistance for all issues from a whole of market broker for support, guidance and assistance.

Hope this helps

Holly