Looking for advice on buying a part of my Dads flat please

liz-paul

This is an idea that I had recently but I am struggling to think of the pros & cons and wondered if anyone on here had ideas.
My Dad's current mortgage will end in a few years when he is 64 with probably about £80,000 outstanding debt on a property worth £200,000 - £220,000. He thinks that there is a reasonable chance that he won't be able to re mortgage due to his age and self employed status. He is considering a couple of options that aren't ideal.
I have been wondering about the possibilty of taking on his remaining mortgage as a long term investment and either charging him rent on my portion or allowing him to remain in the property rent free until death in exchange for ownership of the whole property. Does that even make sense? Basically it would mean that he could live there until he died without worrying about paying mortgages, rent or being evicted & I would eventually own a good property for a relatively small investment. Thats the good side for both of us but......
Does it sound a bit dodgy? Like I'm trying to swindle my dad? (I'm not BTW). Would it be possible for me to legally own the property but my dad to have a legal right to residence? e.g. so that I couldn't just kick him out because I wanted to cash in. Does it seem like a tax/other fee avoidance if I effectively buy my Dads flat for a cheap price as he's approaching his older years?
I haven't even talked to my dad about it so this might be irrelevant. Basically I'm wondering if I can help out my Dad in a way that helps me too but it seems a bit complicated and I don't want to do anything wrong/illegal/immoral or be seen to do anything wrong/illegal/immoral.
Other downsides I have thought of include:
1. It's a V long term investment for me, I put £80,000 now and won't see any of it back for (hopefully) at least 20 yrs when my Dad dies. I would view it like a pension plan I think.
2. My Dad has to die in order for me to cash in. This leaves me with conflicted feelings.
3. My brother and sister wouldn't inherit anything from my dad. But they might not anyway as my dad will most likely have to sell his flat and spend the proceeds to live.

Anyway can you suggest any more potential pitfalls (in a gentle way!) so I can think about this with more clarity? Sorry this post has been epic

Old_Git

its Deprivation of assets,dont go there .
you dont know if your father can get another mortgage .
I would suggest he may get an interest only mortgage that will be repaid
when he dies .
The other option is for you to buy a share in his flat letting him retain his share .
If the value increases in 20 years you make a profit as does he .You will pay tax on this unless its your home as well.If he needs residental care your share is protected .If he lives there until he dies he can leave the property to you (if he wants ) in his will .His share will be tax free

liz-paul

Thanks Old Git, just done a bit of a google on Deprivation of Assets but not found too much info. Does it only relate to requiring care in old age?

Old_Git

f you give away assets in the knowledge that you are likely to need care then your local authority may decide to treat you as though you still own those assets.
This is to prevent people from, say, giving their house to their children and then expecting the state to fund their long term care.
Interestingly...

There is no time limit. The local authority can look back as far into the past as they wish.
However, the local authority could not consider deprivation if the gift were made when you were fit and healthy and had no expectation that care would be required.
I am not sure if it only applies to care homes but someone will be alone to let us know soon .

DVardysShadow

Old_Git wrote: »

its Deprivation of assets,dont go there .

While the question of Deprivation of Assets should be looked at, at base what OP is proposing is very unlikely to be Deprivation of Assets.

The £80,000 mortgage shortfall is assets which father does not have. So no question of Deprivation if OP takes that share of equity - and no question of Deprivation either if father pays a fair amount for use of the share of the asset which he does not own.

Money_maker

How would you feel if your brother or sister had proposed this? Would you be happy to receive no inheritance? If you marry then divorce or die yourself, how will your parent be protected?

liz-paul

Thanks again for the replies - keep 'em coming!
Money maker - I would be perfectly happy if my brother or sister did this if it meant an easier life for my dad. But TBH they wouldn't do it even if they could and my sister especially will be mad if she feels I took all 'her' inheritance. ATM I am expecting no inheritance as my mum has zero assets, my dad will most likely have to sell his place to fund his old age = no inheritance all round. Also my dad can't be bothered to change his will so his old will leaves everything to my mum (his ex) and he thinks my mum will just 'sort it out fairly' for us all :undecided Not really sure how he thinks that will work! It is definately an issue to consider though..... Re marriage/divorce etc - good point. I would probably go into the purchase on my own seperately from my husband which should mean that my Dad was protected in case of divorce...?

cattie

It does sound rather mean & a bit extortionate to be thinking of paying £80k to gain control and ownership of a property worth in the region of £200-£220k, that your dad has no doubt had to make sacrifices for over the years to be able to buy the house, and then want to charge him rent on top!

What happens to the £140k equity that you estimate he might have in the property once his current mortgage deal comes to an end? Does it all go to benefit you to the exclusion of your siblings?

It's very good that you want to help your dad, but I don't think it's right that your help should be on condition of you making a huge financial gain at his cost for giving such help.

If you want to help him then can't you just invest in the property in a way that gives you a share of ownership and allows you to see an eventual return on your investment in it, without cutting everybody else out and being the one who gets everything when your dad does finally leave this earth?

liz-paul

Hi, I think you mis understood me. The idea is to EITHER charge him rent on the percentage I would own (30-40% I think it would be of full value?) OR to allow him to live in it rent free on the condition I get full ownership in the end. Which is almost the same amount in £, I worked out assuming he lived on for another 20 years. I think, my maths is not great.
So I could pay his mortgage for him until the end of his days in exchange for the whole property or I could take out a mortgage and charge him 30-40% of current market rental (£1200 is what his flat would rent for) and in the end still only own the 30/40% share. The down side with this is when he could no longer pay this rent (becaue he could no longer work and only had state pension to live on) I would either carry on paying the mortgage myself and stop charging him or I would have to evict him which I wouldn't want to do.
I can't afford to pay £80,000 up front if the only end gain for me was 30/40% of whatever increase in value the property was. If that was the case then I would be better off buying an £80,000 house locally and letting it out.
Thanks for your reply, hope this post clarifies my intentions a little bit.

Yorkie1

I have a feeling that you may not be able to get a mortgage as you suggest.

If I recall correctly (and I may be wrong), you won't be able to get a residential mortgage because you won't be living there. You are unlikely to be able to get a BTL mortgage because the occupier is a family member.

Even if it were possible, I don't think your mortgage company will allow him to be on the deeds but not on the mortgage - so he would have to sign the whole ownership over to you. That leaves him completely unprotected against anything that may happen in your life.

Also, you mention his will. If made before your parents divorced, it will no longer be valid and the intestacy rules apply instead, which means that any assets will be divided between you and your brothers / sisters.

I think you probably need to go back to the drawing board with this one. Good luck.

liz-paul

Thanks for the reply. Re the will (off topic, sorry!). My parents were never married and therefore not divorced. Does this still mean that the will would still be valid or not, do you know? If it isn't still valid then there is even more reason for him to get a new will as my siblings are not his children (his step children) so I'm guessing they wouldn't automatically be entitled to anything? Although my dad is their dad in every way except blood..... Something else for me to look into I think...?

As to the mortgage I would prob put half down cash and take the other half from our offset mortgage/savings.... Thanks for the input, all appreciated :beer: