Buying property from Parents

Mafiosa2012

Can three people take one mortgage out? We want to buy our parents house to release equity but they still live in the property?

Thrugelmir

Are your parents to remain on the mortgage?

kingstreet

A three-party regulated buy to let mortgage if your parents aren't two of the borrowers?

That promises to be interesting.

That's one for tomorrow, I reckon. It's too much like work for a Sunday night.

GMS

Who are the 'we' in this?

Will parents be party to the mortgage? What is the purpose of the equity release?

holly_hobby

Yes you can have upto 4 mortgagors - but not all 4 incomes are fully multiplied up.

If Mum and Dad are to be party to the mge, there are issues re max term relevant to their age (which may make the cost of it prohibitive, transfer of equity to you (poss SDLT liability), and if you want to pch a property for yourself - this mge will be a commitment to be inc in the affordability.

If they aren't to be party to the mge, they will have to come off the mge deeds, which means full TOE to you (and others if involved ?), and again SDLT liability if nil rate band exceeded. Compounded by the fact (if a mge is sought), that they are to remain resident post completion - which is a no-no and is in respect of possessionary rights of the lender.

Notwithstanding the above, and if they wanted to remain owners, a BTL mge could not be sourced in your and their names, as obv Mum and Dad can't be party to a BTL mge, in which they will actually live as their primary residence, so we are back to a full TOE - but the residency issues remain, as this now becomes a sale and rent back arrangement - which is again a no-no mge wise.

So - there are major issues to the proposed exercise as you can see (inc deprevation of assets, if any means tested/state funded long term care is later sought by/on behalf.of your parents, and/or gift with reservation PET regs (if sold at discounted price and no rent paid), if we are into IHT waters with their estate).

If your parents need equity, and their age or income prevents a residential remortgage, how about downsizing or considering an equity release lifetime mge ? Which wouldn't involve you being party to any mge, any assessment of their income, or their transfering ownership to you or anyone else (not withstanding home reversion plans).

There ARE various issues to be considered re any lifetime mge arrangement, largely erosion of free capital, but this can be ringfenced if a scheme is selected were the payment of mthly interest is permitted by the provider, of which there is at least one in the current lifetime market, and its common sense to select a provider whom has a no neg equity gte - but thats all for another discussion ....

Hope this helps

Holly