Help From Parents

debtfreeby2013

Hi All,

I have had a nightmare in the private rented sector and, basically, keep bobbing to and from my parents. I have been saying for ages that I just want to find a homely place that, preferably, I can put my own touch on but everytime I try something goes horribly wrong (this time it is severe damp throughout the property).

My parents next door neighbour is selling up and I made a jokey comment to say 'you could buy it and I'll pay the mortgage' to my mum her reply was simply 'you can't afford the mortgage on that place' (it being a 4 bedroomed house).

Later, my dad came in and said to my mum 'thinking about what we were talking about last night, next door would be too big for her'. At this point I got very excited asked my dad what he meant and he said they were thinking of 'investing' in my interest.

I've been trying to find information on things in relation to this and how my parents can help me get on the property ladder or if they can buy and let back to me but there are so many different things out there it is difficult to get an idea of whether or not it's viable.

I'm a student at the moment so on a part time wage of £10,235 although I get student loan of £6900 a year. I'm currently renting and paying £250 as my share of the rent although I am hoping to move in on my own in September and have worked out I can afford up to £500 (MAYBE £550) a month. I have one year left of University.

Does anyone have any ideas on what I can approach my parents with in order to try to convince them that this is a good idea? Think the best options at the moment are:

Buy to Let - but what are the implications on that

Joint Mortgage - but will this be affected by the fact that they already own their home

Guarantor scheme - how does this affect the amount I can borrow? If that doesn't cost them any extra they may be willing to do that and lend me the money for a deposit.

My mum is concerned, however, that they are 58 so might not get a mortgage.

Any help greatly appreciated as if there is any way I can get on the property ladder and have the freedom to maintain my own home then I would jump at the chance.

Thanks
L

19lottie82

Do you parents earn a reasonable wage?

How much is the property?

Do they have a mortgage on their existing home, or has it been paid off?

poppysarah

Don't think of the student loan as income. Think of it as a debt waiting to happen.

debtfreeby2013

19lottie82 wrote: »

Do you parents earn a reasonable wage?

How much is the property?

Do they have a mortgage on their existing home, or has it been paid off?

My parents joint income is approximately £59,000 (Dad £32ish and mum £27ish).

The property next door would be about £170,000 but that's been put by the by because of size etc. I would think property in the region of 80-130k.

The mortgage on their existing home is pretty much paid off, think there's about 2 years left or it may even be paid off already.

debtfreeby2013

poppysarah wrote: »

Don't think of the student loan as income. Think of it as a debt waiting to happen.

£5000 of it is a grant, £1900 is a loan so it is mostly income.

trfcgirl06

I've been in a similar situation with my parents offering me money for half a deposit for buying a house.

Then I heard a radio programme by Alvin Hall (money guru) and it made me think twice about accepting the money straight away.

Firstly, your parents are 58 and are nearing retirement age. Have they planned for their future and the fact that they may live for another 30-40 years. What will they live on - a pension, savings?

What if they lend you money, but then need 24 hour care in the future? The money that could have been used for that is tied up in your house...

I know it's a grim prospect, but it is something that should be thought about before they commit. I told my parents they need to look at their future finances and I need to be stable financially (in and out of my overdraft) before we could commit to such a deal.

Alvin Hall says that the best gift a parent can give to their child is to be financially stable in their old age and not become a financial burden to their children.

Sorry if that seems a horrible post, but it's something I really took on board.

Here's the link for the programme:

http://www.bbc.co.uk/programmes/b012w4h2

debtfreeby2013

trfcgirl06 wrote: »

I've been in a similar situation with my parents offering me money for half a deposit for buying a house.

Then I heard a radio programme by Alvin Hall (money guru) and it made me think twice about accepting the money straight away.

Firstly, your parents are 58 and are nearing retirement age. Have they planned for their future and the fact that they may live for another 30-40 years. What will they live on - a pension, savings?

What if they lend you money, but then need 24 hour care in the future? The money that could have been used for that is tied up in your house...

I know it's a grim prospect, but it is something that should be thought about before they commit. I told my parents they need to look at their future finances and I need to be stable financially (in and out of my overdraft) before we could commit to such a deal.

Alvin Hall says that the best gift a parent can give to their child is to be financially stable in their old age and not become a financial burden to their children.

Sorry if that seems a horrible post, but it's something I really took on board.

Here's the link for the programme:

http://www.bbc.co.uk/programmes/b012w4h2

It is an interesting point. I have spoken to my mum about this before not in this context though. We heard a radio 4 programme about the whole 'should you scrimp on your retirement to leave inheritance to your kids' issue. We decided that on their retirement they can go base jumping, deep sea diving and white water rafting and we don't want any inheritance. Lol. Although, the serious point is, although my parents don't talk about money, I think they are pretty much set having both paid into pensions since the age of 18, and dad being on a ridiculously good pension in his job (70-100% final salary pension).

My dad has talked of it as an investment and if they bought a 1 bed flat I would hopefully not be in it for more than about 10 years (I'm 27 so by 37 would hopefully be on the way to family of my own so would need a bigger place) so whether we split any profits or even carried on renting it out and they earn/we split both could work out well for my parents.

Also, any deposit money put forward would absolutely be a loan. I'm in a much better position financiall than I was 6 years ago (when I had nearly £22,000 debt) and have proved that I can manage that sort of thing (have reduced debts to around £8000 in the last 6 years and still declining rapidly).

If I was to only borrow a mortgage then working full time in 18 months time should put me on a wage of approximately £23,000 (based on average in my job sector) with a disposable income of nearly £1000 so would be very much set to pay back my parents, you know? I would hope to pay them back by the time they retire.

jennifernil

What they can do for you will depend on their income and savings, and your plans.

If they have enough savings to give you a deposit, you could possibly get a guarantor mortgage. They would be guaranteeing the repayments, so would need to be able to afford it if you defaulted. The house would be in your name only. Lenders do not like loaned deposits, so they would need to make it a gift. Doesn't stop you giving them money later though!

The amount you could borrow would be based on their income, minus any borrowing they already have. Their age should not be a problem.

The question is whether you and/or they can afford the repayments, and whether buying a place is sensible. Will you be staying in the area several years, what are your job prospects, stuff like that.

The other option is for them to buy somewhere and rent to you. That would probably mean either remortgaging their present house, or getting a BTL mortgage.

Your rent would be taxable income for them, but they can set mortgage interest and other expenses against it.

I would go for a 2 bed place if possible, easier to let I think.

We did option 1 for our daughter, but we only had her to consider then, do you have siblings who might also need help?

debtfreeby2013

jennifernil wrote: »

What they can do for you will depend on their income and savings, and your plans.

If they have enough savings to give you a deposit, you could possibly get a guarantor mortgage. They would be guaranteeing the repayments, so would need to be able to afford it if you defaulted. The house would be in your name only. Lenders do not like loaned deposits, so they would need to make it a gift. Doesn't stop you giving them money later though!

The amount you could borrow would be based on their income, minus any borrowing they already have. Their age should not be a problem.

The question is whether you and/or they can afford the repayments, and whether buying a place is sensible. Will you be staying in the area several years, what are your job prospects, stuff like that.

The other option is for them to buy somewhere and rent to you. That would probably mean either remortgaging their present house, or getting a BTL mortgage.

I would go for a 2 bed place if possible, easier to let I think.

We did option 1 for our daughter, but we only had her to consider then, do you have siblings who might also need help?

I think the second option is the most likely to be honest. Although it's possible to maybe do the guarantor mortgage. I am definitely planning on staying in Cardiff for the forseeable future (3rd generation Cardiff girl, lol) and my current job is secure for 3 years (and considering I work in the voluntary sector - that's pretty amazing) although it is part time so in 18 months I would be looking for a different job or a second part time job to raise my income. although by the time I finish Uni I intend to be debt free (near enough - will have 2 months of £70 a month loan to pay) so as a temporary measure and a bit of belt tightening I should even be able to do it on part time wage (this wouldn't be sustainable, obviously but could manage for a month or 2 while I find something else).

I do have 2 brothers but one of them (25) already has a mortgage (he went in joint with a friend and pays 1/5 of the current mortgage value - jammy git, lol) and the younger brother (22) at the moment has no intention of going anywhere. The younger brother also has no debt so would find it far easier raising a deposit when the time came and parents could still be guarantor for the mortgage for him if it came to it, right?

jennifernil

Whether they could be guarantors for your brother would depend on you. You would need to be earning enough to qualify for the mortgage in your own right, then they could be removed as guarantors for you.

The total they can guarantee does depend on their income and other borrowings.

debtfreeby2013

jennifernil wrote: »

Whether they could be guarantors for your brother would depend on you. You would need to be earning enough to qualify for the mortgage in your own right, then they could be removed as guarantors for you.

The total they can guarantee does depend on their income and other borrowings.

Ok, thank you. I may talk to them about the guarantor option later then. I'm hoping to be able to support my own mortgage in approximately 2 years so could take them off and my bro is in no rush to leave at the moment, he's single and in Uni (mind you, so am I, sort of, haha) so is perfectly settled at mum and dads (plus the free food, washing, ironing, cleaning service is second to none, lol).

As I said, their income is approximately £59,000 combined and I THINK they're finished with their mortgage or pretty close at least with 1 or 2 credit cards. Pretty sure they're safe as long as it doesn't go on age, that was my mum's biggest concern when it was mentioned yesterday.