In-laws buying house and renting to us

BeckyC2be

Hi all, I was wondering if anyone could give me some advice.

Me and my husband are currently renting and would like to get on the property ladder, we were going to borrow a deposit from the in laws in a couple of years to do so.

However, they have been talking and have offered to buy a house, or at least put a deposit down and then rent it to us (basically us just paying the mortgage).

We would then in 5/10 years or so sell the house and split the proceeds somehow.

What I a wondering is, what is the best way for them to do this, in terms of mortgages and such. Would it have to be a buy to let mortgage?

I'll probably be back in ten minutes when I've thought of sixteen more questions!

Thanks in advance

P.s I know a lot of people wouldn't recommend doing something like this with family members but we have a terrific relationship and things going wrong aren't a worry.

holly_hobby

If there is no mortgage reqd - then no problem (aside from HMRC returns).

If a mortgage is reqd - it will need to be a regulated buy to let product (as more than 40% of the property is to be let to family), deposit circa 25%, with obv they having to meet the lenders status requirements.

Mum and Dad will have to make an annual self assessment declaration re the rental income recd (even if there is no profit after permitted deductions, to actually incur a tax liability).

As a 2nd property, when/if they sell it to you (or A.N Other), they will be exposed to CGT calculation (less annual unused annual personal CGT allowance) on any determined gain/market value to the original cost of acquisition.

Recommended an experienced whole of market broker to guide you all through the process and considerations (inc provision of an AST), in addition to the updating of wills etc.

Hope this helps

Holly

BeckyC2be

Thank you Holly hobby, thats brilliant, just needed to know where to start really. Thanks again

holly_hobby

No probs ... they are only main starting points for consideration, your broker will walk you though the finer details and process ...

Good luck !

H x

CLAPTON

without any facts and figures it's a bit difficult to say much but

why can't they provide the deposit as a gift and you get the mortgage?

BeckyC2be

We don't earn enough to be considered for a mortgage. My husband gets around 14k a year and I'm on about 6K (I'm a student)

They are going to get the mortgage so we can get a slightly better house and a better mortgage.

We are looking at houses around the 60-80k mark (which where I live can get you a nice 3 bed!)

They can put down between 10-20% as a deposit

If you need any more info, please ask.

Wh05apk

Could you not just get the mortgage in all 4 names, they can provide the deposit, you can then pay the mortgage. Just remember to sort out who gets what when/if the property is sold.

holly_hobby

Effecting as joint owners, would of course mean it can no longer be a (regulated) BTL with you as tenants - and the max term will be determined by parents ages, which you may find restrictive (subject to future TOE & amendment). As max redemption ages are typically lower on a residential mge than than under a BTL arrangement (but this may not be an issue to you).

Their income would also need to be sufficient to service their own commitments (inc any existing mge), and the joint mge with yourselves, if not effected under a BTL arrangement.

If you proceeded on this basis, and find yourself in a future financial situation to remove their interest/buy them out (which would obv help to manage any initial max term issue by an application to extend) - this will be simplified by a transfer of equity (TOE) - via lenders agreement or remortgage to an alternative provider) with associated legal & HMRC implications.

The equity deposit, as touched on by Wh05. may be protected by a deed between the parties. Whilst if the purchase is effected on a joint tenants basis equity ownership of the deceased will automatically pass to the surviving owners, whilst if you effect ownership under a tenants in common basis, you will effectively ringfence the equity of each owner, meaning that they may bequeath their share via a will to a chosen beneficiary (or inheritance will follow intestacy laws, if no valid will is in place at the time of death).

As advised, you can see that there are various complications, and you need to sit down with an experienced broker on this, to determine the most suitable and cost effective way to achieve your requirements, given the groups aspirations and financial and personal circs as a whole.

Hope this helps get the ball rolling ....

Holly

BeckyC2be

Thank you Holly, all of your replies have been a great help. I wish I could click the thanks button more!

Yorkie1

Duplicate thread with lots of responses over in House Buying too...

https://forums.moneysavingexpert.com/discussion/4138945