Do we take out a buy-to-let mortgage for PILs

Catzpaws

DH's parents need to downsize because of financial problems, it's a highly stressful situation. They are 60 & 62. Basically, they need to sell their own lovely home because they can't remortgage. They have just sold their own house and need to move out next week.

They were told that they had an offer in principle for a £20k mortgage for a £130k property - the only decent-ish place that they could find on that budget - and that offer had been accepted. However, today, they've been actually told that the mortgage deal has been declined.

A mortgage adviser has suggested that DH take out a buy-to-let mortgage for £20k with the PILs giving us the equity from their house sale. He's mentioned something about the fact that they pay DH 'rent' (which I don't understand).

I want us to help as they have nowhere else to turn now, but am concerned about the implications - tax, ability for us to get another mortgage if we wanted to move, what happens if DH were to die, etc. etc. etc. We have a meeting with a mortgage broker tomorrow morning and we need to be prepared really.

Is this likely to end in disaster?? (PILs are slightly useless with finances, plus although they're in good health now, you can never tell what's around the corner).

In terms of income, FIL has just landed a 3 month job, which could result in longer term work. However, he is 62 so not going to be working forever. MIL does not work. Even if not working (if FIL becomes unemployed), they have told DH that they can pay the mortgage with pension credits.

Any advice would be gratefully received.

GMS

There will almost certainly be issues with your in laws providing the deposit for a mortgage which they are not party to.

Makes life difficult for the lender in the event of any repossession.

Catzpaws

Thanks GMS... What do you mean? I think it was assumed that they would give us the cash and we would use that as deposit. (As you may guess, I've not researched this at all yet).

Is there a better solution, in your professional opinion?

Thrugelmir

Honest opinion. Perhaps they need to purchase a property within their budget.

If employment does continue for a few years. Then suggest that the money is saved. Then a better option may be viable.

holly_hobby

The adviser whom has suggestged you & hubby obrtain a BTL for your PIL (with they providing the deposit), does not understand the implications of the "advice".

Firstly, buy to let mortgages are un-regualted, however if the property is to be occupied by a family member (ie hubby's parents), than a regulated buy to let is reqd, and which is generally assessed under 2nd property regs (menaing that its based on your income & commitments, and not on any agreed rental payment (as per unregualted BTL arrangements).

Secondly, if PILs are providing deposit for the property they will live in, it isn't an unconditional gift (the only type a lender will accept), but actually a gift with reservation, it essentially being provided by Mum and Dad in direct exchange for the purchase of and their residency in, the property. This raises beneficial ownership rights, which will negatively affect any future possession order the lender may wish to petition for - which is why they won't accept any deposit donated on this privso.

Lets get back to basics ...

Why were they declined from a prev granted AIP/DIP ?

If decline was nothing to do with adverse credit data or insufficient income, has the adviser attempted to source an alternative lender ?

If not, why not ?

Hope to help

Holly