Buying My Parents house To Rent Back To Them

moneycrazy

i have searched the web but not finding much in on this subject and what the implications of this are and were it can be done legally.

Mojisola

Legally - you just buy their house (using a BTL mortgage if you need one) and charge them rent.

Comply with all the relevant laws about being a LL.

Pay tax on the rent they pay you.

G_M

As above. Legally.

Read:

New Landlords (information for new or prospective landlords)

But also consider (google?):

* deprivation of assets
* inheritance tax
* mortgage restrictions on renting to family

moneycrazy

Hi property has been value at £120k and has 30k equity in it, so as far as i am aware theres no inheritance tax issue.

What the the restrictions on getting a mortgage to rent to a family member?

Also is there such a thing as an inheritance mortgage before you folk pass on?

Mojisola

moneycrazy wrote: »

What the the restrictions on getting a mortgage to rent to a family member?

If you are going to need the rent to pay the mortgage and your parents stop paying the rent, are you going to evict them and get in someone who does pay the rent?

Many people wouldn't do that so it puts the mortgage payments at risk. Companies don't like to take that risk.

G_M

moneycrazy wrote: »

Hi property has been value at £120k and has 30k equity in it, so as far as i am aware theres no inheritance tax issue. Apologies - I mis-read. Thought they were giving you the house.
What the the restrictions on getting a mortgage to rent to a family member?
Some BTL mortgage lenders do not permit letting to family.

Also is there such a thing as an inheritance mortgage before you folk pass on?

Not that I know of. Not sure what you mean by this though.

If you DO follow this up, just hyperthetically, what would happen if

a) your parents stopped paying your the rent (lost their income for example), and you could not pay the mortgage? Would you evict them?

b) if you needed to sell the house (you lost your job and needed the equity), where would they go?

franklee

I presume the fact that you are doing this with family avoids any sale and rent back regulations.

http://england.shelter.org.uk/get_advice/help_with_money/mortgage_arrears/sale_and_rent_back_schemes

http://www.fsa.gov.uk/library/communication/pr/2012/011.shtml
"In August 2011 HM Treasury introduced new sale and rent back regulation requiring anybody purchasing a property under a SRB scheme to be authorised by the FSA, unless the buyers and sellers are family members."

Even so the failings of the schemes may well apply: The tenants may not be able to afford the rent. No correct assessment of if it was a suitable thing to do.

For example what if the OP gets into financial difficulties and is unable to pay the mortgage, his parents risk eviction. etc.

moneycrazy, Perhaps if you post what you are trying to achieve. Are your parents in financial difficulty paying the mortgage? Or is it that they want to give you a gift of the equity so that you would buy the property cheap? In short why are you thinking of doing this?

paddedjohn

Ok no one else has asked so I will, will your parents be relying on benefits to pay the mortgage?

agrinnall

If by "inheritance mortgage" you mean one that is taken out by (most likely) an older person with the proviso that on their death the mortgage passes with the property to the inheritor, then I do recall reading about such things back in the days when mortgage money was freely available. However, I would be pretty amazed to find any reputable lender offering one now. I think they were more common in some European countries where there was an expectation that a home would remain the family.

Linton

G_M wrote: »

Not that I know of. Not sure what you mean by this though.

If you DO follow this up, just hyperthetically, what would happen if

a) your parents stopped paying your the rent (lost their income for example), and you could not pay the mortgage? Would you evict them?

b) if you needed to sell the house (you lost your job and needed the equity), where would they go?

Or if you died.

Mojisola

franklee wrote: »

moneycrazy, Perhaps if you post what you are trying to achieve. Are your parents in financial difficulty paying the mortgage?

Or is it that they want to give you a gift of the equity so that you would buy the property cheap?

In short why are you thinking of doing this?

I agree - if the OP doesn't mind saying what the motivation is behind the plan, the advice could be tailored to the situation.