Repaying Lifetime Mortgage

nimagraven

Hi,

I'm not sure if I have the correct board.

My fiance and I currently live in my parents house. My parents have a life time mortgage. They are worried about the first time buyer's market and how much it would cost for us to get our first house.. So they have offered that we can have the house and all live together. This works out great for all of us because we'd be able to chip in and help each other out and also if my parents require care then I'd be living in the same house as them and able to provide it without too much difficulty.

The issue being, they have a lifetime mortgage, so we would need to take a mortgage out to pay that back, wouldn't we? How does that work?

Also, my parents want us to buy it under stipulations. That we can't just chuck them out.. Fiance is a bit nervous because that kind of agreement would potentially mean having it in my name and he doesn't want to be chucked out by me either :rotfl: :P

Finally, I know that when my parents die they would have offered a split between me and my brother. My parents are still keen to have this happen. Is there a way I could work that out with my brother in a private agreement? Penalties, implications, advantages for this?

Can anyone advise me in this difficult situation? Perhaps a best construct or permutation that we can go after (tenants in common)? I also realise there may be a tax penalty to pay, so that's why I asked about this. We currently have £20,000 in savings, due to be around £30k by the end of year. House was valued at 180k and the lifetime mortgage (AVIVA) is probably about 60-65k currently, I'm unsure of the early exit fee at this moment in time.

Thanks for the help if you can offer it I realise it's a strange request.

cte1111

My advice would be - don't do it.

It sounds like a complete minefield, there are at least 5 people already involved - you, your fiance, your Mum, Dad and brother. The chances that all 5 of you are going to agree on everything for the next x years are very small. Then what happens? Who decides? Just a recipe for disaster and big family falling out.

You've got a good deposit, I would concentrate on looking at what you and your fiance can afford with that and your current incomes.

nimagraven

Noted, but if I did go down the road of this then the issue being I need to say "no" and have a good/non-insulting reason to say no as it's lovely for my parents to offer it.. Financial/legal permutations being the best option rather than just a flat out "we'll all fall out over it". They will take it better if I said to them it would cost us just the same to buy this as it would to buy another house for the same value somewhere else for example.

Yeah, it's not a bad deposit.. But I can't see myself moving out in the next two years, and there's no way I'm moving into a house in a run down area just because it'll be cheap... Then the other side of the coin is I can't get a good house in a nice area because it costs too much. I looked on calculators and at the moment a £170k house with a £20k deposit would be around 950 p/m repayment which is absurd. Even though me and my partner earn quite a bit between us I wouldn't be comfortable with this type of repayment per month. What if one of us is made redundant? What happens when we have kids? How can we afford bills on top of that? OK. Probably preaching to the choir there, but I honestly find it so frustrating with no real great outlook for our future.

holly_hobby

Hi there

Ok, yes in theory you could purchase your parents home from them, and they redeem their lifetime morgage. Lifetime mortgages are ordinarilly redeemed on the mortgagors ntry into longterm care or death, (which ever happens sooner) and usually by selling the property, although the funds may actuallly come from anywhere.

They can be repaid earlier than entry into care or death, but depending upon when the mortgage was effected, there are usually very hefyt redemption penalties - so first thing to check is this.

Secondly, your parents (if not being party to the new mortgage, which may be prohibited due to their ages) will need to sign an agreement to state that they give the lender vacant possession, if sadly a possession order is effected by the lender.

Furthermore, the property if sold to you will be considered as a deprevation of assets, and considered as still owned by them, if your parents apply for any long term care fees assistance. (which may be required despite your best plans of intending to care for them).

Additionally, if the property is sold to you at an undervalue, there could be estate planning issues, re PET and gift with reservation regs.

Also your parents want to be guaranteed a home, but you cannot give them this guarantee - as if the mortgage is not serviced, the lender as discussed above, may effect a possession order - turfing you all out ! You could of course want to move on, anything can happen, and unless you are earning enough to service this proposed mortgage and another, you'll be stuck renting (that is you can afford the rent & mge).

Don't forget, stamp duty issues (FTB 250k incentive ends 25 March 2012)

Your brothers inheritance, you would need to have the monies put by, or remortgage to pay him off. (subject to free equity and status of course)

There will be other issues I've forgotten .. I'll pop back if thats the case...


Hope this helps

Holly

nimagraven

Thanks Holly. Brilliant info. If you can think of any more then it would be most appreciated.

getmore4less

Loads of people are successfull with this senario

rememeber this was very common not that long ago.


There are issues but without a redemption figure for the current lifetime you won't know where to start.

What are the projections for this debt, inheritance may cuurently be projected at ZERO or much lower than you(and brother) think so not that much of a barrier to a solution.

Does your brother have any assets?

One solution is you(parents + you + brother) jointly own the house debt free(mortgage debt free by other means).

This protect the property for your parents to live in,

You get rid of the liability against the property which will distroy equity.

Consider the age and health are all the parties involved.


deprivation of assets will become less of an issue anyway since they don't own all the house anyway and as time goes on lesss of it.