Buying Property with Parents

LouiseStone_2

Myself and my partner are planning on moving to a property with my parents. The property we are looking at has a two storey double garage that we plan to have made into a self contained annexe for my parents to live in and we will live in the main house. It is on the market for £500,000.

My parents own their current property outright and expect to sell it for around £330,000. They would then use let’s say £300,000.00 as a deposit on the new property and we would look to have a mortgage on the remaining £200,000 (minus any equity we have from our property). Anyone know if something like this is possible?

harvey115

That sure will be possibly, with the LTV you are after.

However you may need to get permission from the council to make changes in the property.

I would suggest you speak to a broker to get a good deal and avoid any pitfalls/confusions.

holly_hobby

Officially you will need planning permission for the garage conversion - which I would look into pre-purchase, if not having the garage as an annex for parents will be a deal breaker. (as the LA can refuse an application). Also, the lender once mortgaged, should be advised and agree to any structual changes to the property - as this is affecting their suriety, and may have a negative effect to the market value.

There are also various further issues with the proposition, if a mortgage is reqd.

A ......

If parents are to be noted on the deeds as joint purchasers, then they will also need to be party to the mortgage - which means (even if their income is not reqd for affordability, the max term will be dictated by your oldest parents age, and the lenders max permitted age at redemption). Although there is a lender whom will go to 90 yrs - this is not a typical max age, generally its circa 75-80'ish.

Property should be held as joint tenants, which in the event of death of any of the owners, would mean an automatic division of the equity between the remaining owners.

If held as tenants in common, then the individual share of the owner does not automatically pass to the surviving owners, but is bequeathed via will, OR if no will, will be passed under the laws of intestacy.

B

If you plan on not having parents on deeds to avoid the max age issue, you have another problem with their provision of 300k in respect of the purchase - which will be cited as a gift with reservastion, and cause possessionary issue concerns with the majority of lenders, due to the donor's residency in the property.

You also have the issues re deprevation of assets re parents, if any future application for state assisted long term care is reqd.

Furthermore, and notwithstanding the deposit issue, parents may not be happy to be absent from the deeds - especially if you fail to maintain any mortgage and an application for possession is made to the courts by the lender (or any other financial provider in the event of default and a charging order) - as if a mge is obtained to which they are not party, they will have to sign a consent to vacate declaration for the lender. Which essentially means that they will have NO residency rights, upon any mge default and resulting possessionary action that may be taken by the lender.

What happens if the property partnership is to be disolved, you and hubby divorce (and any settlement) ... etc .. etc...

Additionally life and income protection is required (if you want parents to retain the propery) on those mortgagors whose income/salary the mge is being based on (which I guess will be you and hubby). This should be written in trust, and will ensure that if either/both you and hubby pass before your parents, they won't have the responsibility of either servicing the mge on their retirement income or having to settle the os mge (if they are not on deeds, and the property is bequeathed to them via your will - which I suggest you all update to reflect situation and requirements).

The above are the main starting points of consideration in an exercise such as this ...

You need to sit with an experienced whole of market broker to determine whether this proposition is really as attractive as it looks on paper .. and also a property and family law practitioner re the legal implications.

Hope this helps

Holly