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Buying parents house to rent back to them?

My parents owe about £100k on a mortgage and debts and have a house worth £140k. They are both 65 and my dad still works full time.

I would like to help them by buying their house on an interest only mortgage over 25 years so the payments are small and mum and dad can pay this as rent to me and they can continue to live in the property as long as possible.

I had the idea that I could get a deposit for this mortgage from their equity ie family gifted deposit, but an Internet search suggests this may be very difficult. I cannot stump up money any other way, as maxed out on my own mortgage.

Does anyone have any experience of doing this ? Or any better ideas for me to help them out?

Comments

  • McKneff
    McKneff Posts: 38,857 Forumite
    Part of the Furniture 10,000 Posts Name Dropper
    edited 9 July 2012 at 7:51PM
    Apart from selling their house on the open market, paying all the debts off and renting privately.

    Seems the easiest option to be honest.

    Depending on when dad plans to retire and they are renting from you they wouldnt be able to claim any means tested benefits unless you had a proper rental agreement with them, with rent at market value, and you would evict them if they didnt pay the rent. You would also have to have building insurance, gas safe certificates .
    IE, a proper landlord with a buy to let mortgage.

    Seems an awful hassle to be honest.
    make the most of it, we are only here for the weekend.
    and we will never, ever return.
  • if you are planning to buy the property at less than market price, then get good advise on inheritance tax.
  • Dave_Ham
    Dave_Ham Posts: 6,045 Forumite
    Tenth Anniversary Combo Breaker
    Usually I am amongst the most positive on here, although this going to be tough..

    You can have the deposit gifted, although unsure there will be enough in the numbers provided. Added to this, you will only get interest only on a buy to let although many of these do not like the family gifted deposit.

    You need to see a good broker and expect to pay a fee to get this pieced together...

    You are doing a good thing though, so please ask as many questions as you need to and will try and answer in detail.

    May require a little more information though..
    I am a Mortgage Broker
    You should note that this site doesn't check my status as a Mortgage Broker, so you need to take my word for it.
    This signature is here as I follow MSE's Mortgage Adviser code of conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice.
  • GMS
    GMS Posts: 5,388 Forumite
    Part of the Furniture 1,000 Posts Combo Breaker
    Having the previous owners as tenants will also prove an issue for many lenders. Check this prior to any application
    I am a Mortgage Adviser
    You should note that this site doesn't check my status as a mortgage adviser, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice.
  • BobQ
    BobQ Posts: 11,181 Forumite
    Ninth Anniversary 10,000 Posts Name Dropper Combo Breaker
    If you are maxed out on your mortgage how could you afford it if interest rates rose?

    Can you parents afford the rent once they retire?

    What happens to them if you lose your job ?

    Would they be better off selling the house and using their equity to buy a flat with a reduced mortgage?
    Few people are capable of expressing with equanimity opinions which differ from the prejudices of their social environment. Most people are incapable of forming such opinions.
  • Thank you all for your comments.
    I already have 1 buy to let and am in the process of buying another. These will hopefully provide me with some financial security in my old age....
    I would really like to buy least one more buy to let property in the next few years, and I am also concerned that doing this for my parents will affect my ability to do that - I read somewhere that many lenders don't like you to have more than 3 buy to let's - could anyone comment on that?
  • GMS
    GMS Posts: 5,388 Forumite
    Part of the Furniture 1,000 Posts Combo Breaker
    Lenders have different criteria. Some limit BTL's, some don't. 3 is not likely to cause issues with raising finance for more.
    I am a Mortgage Adviser
    You should note that this site doesn't check my status as a mortgage adviser, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice.
  • Smi1er
    Smi1er Posts: 642 Forumite
    Roohoohoo wrote: »
    My parents owe about £100k on a mortgage and debts and have a house worth £140k. They are both 65 and my dad still works full time.

    I would like to help them by buying their house on an interest only mortgage over 25 years so the payments are small and mum and dad can pay this as rent to me and they can continue to live in the property as long as possible.

    I had the idea that I could get a deposit for this mortgage from their equity ie family gifted deposit, but an Internet search suggests this may be very difficult. I cannot stump up money any other way, as maxed out on my own mortgage.

    Does anyone have any experience of doing this ? Or any better ideas for me to help them out?

    They're both 65.

    Who pays the rent when your Dad retires?
  • holly_hobby
    holly_hobby Posts: 5,363 Forumite
    1,000 Posts Combo Breaker
    Roohoohoo wrote: »
    I read somewhere that many lenders don't like you to have more than 3 buy to let's - could anyone comment on that?

    Thats 3 BTLs with the same provider, due to controlled exposure paramaters.

    Buying your parents home and (officially) renting it back to them, WILL be the main obsticle you have in sourcing the finance.

    Not withstanding, that BTLs are unregulated finance, but where more than 40% is let to family members this turns it to regulated finance - and whilst there are select providers whom will consider this, its done so on full ASTs and ordinarilly on std affordability assessments (due to its regulated status and the family connection).

    You do need to speak to an experienced BTL Mge Broker, whom can discuss things further than on an open forum.

    Hope this helps

    Holly
  • JimmyTheWig
    JimmyTheWig Posts: 12,199 Forumite
    Part of the Furniture 10,000 Posts Name Dropper Combo Breaker
    kebab77 wrote: »
    Would be far simpler for them to try to switch to interest only themselves?
    Not likely at 65, I wouldn't have thought.

    I agree with the "they should sell and rent privately" logic.
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