Should I help buy my parent's council house?

SephirothX

My parents have been offered a great deal under the right to buy scheme, £28k down from £64k valuation. My mum doesn't work and my dad is a few years from retirement age so mortgage options are limited, even though he plans to work until about 67. Even during retirement his pension would easily cover the cost on his end. Basically they want me to go halfs, IE we each pay about £165 per month towards an 8 year mortgage, which would be under his name. We'd probably split any sale price after that, so there's a good deal in it for both sides as they can't afford it without my help.

What I'm concerned about is my side. If I'm paying roughly £2k per year into this how bad is this going to screw me over getting my own mortgage? I have been saving for a deposit and currently have about £16k in savings plus a bonus due in April. My income isn't big, £17.6k + annual bonus. No idea what the bonus is as this will be my first, estimating £2k. (Do mortgage lenders even take bonuses into account?)

I must add that I have no intention of buying my own place until at least next year, maybe the year after. My savings will be higher by then too, I reckon I could get to 25-30k before I buy depending on how long I wait. (It's cheap living with the parents). I also receive annual pay reviews towards the end of the year.

But yeah, would paying this debt to the parents every month severely harm my wants of a mortgage? Is it pretty much just the same as saying my income is £15.6k? Thing is my bonus could cover that £2k so it's not so simple. I'm in my late 20s so I don't want to live with them for the next 8 years. I'm only doing so now because I went through the system late and I'm building my savings. I could technically clear my side of the parents' mortgage straight away but I wouldn't want to destroy my savings.

Some advice would be good as I can't figure out what to do. One half of me wants to because it's a good investment for the future but the other half is worried about the potential consequences on the next 8 years of my life.

PS. I live in the northeast, house prices are pretty low here.

japmis

BUY IT!! It's a great deal and will help you and your parents in the long term. It won't affect your chances of getting a mortgage because there won't be anything in your name.

McKneff

The first thing is the mortgage would have to be in your parents name, they would be assessed to see if they could afford this money that they are going to borrow, at that time, you and your money are irrelevant.

It isnt as plain sailing as your parents and you seem to think.

What would happen if they had to have care when they are older and the house is their only asset, which may have to sold to pay for it.

Is your name on the tenancy with your parents.

paddedjohn

How do you work out that you can buy the place with an 8 yr mortgage? you pay £165 and dad pays £165 per month for 8 years is only around £32k without any interest added.

paddedjohn

japmis wrote: »

BUY IT!! It's a great deal and will help you and your parents in the long term. It won't affect your chances of getting a mortgage because there won't be anything in your name.

It will totally affect their chance as the bank would want to know their outgoings, plus the OP would probably have to get the mortgage in their name if they were allowed to by the council,

japmis

paddedjohn wrote: »

It will totally affect their chance as the bank would want to know their outgoings, plus the OP would probably have to get the mortgage in their name if they were allowed to by the council,

If the mortgage is in their name then yes, obviously, it would affect the OP.

If the mortgage is solely in her parents name and they have an informal agreement then she isn't obliged to declare family loans.

I applied for a mortgage yesterday (which was approved) and they didn't ask if I had any debts to parents/family (which I don't have anyway).

japmis

@SephirothX this would be a great question for the weekly moral maze that Martin does if you wanted to submit it?

BobQ

Its not an easy decision. If you decide not to buy yourself, its a good opportunity to make an investment while ensuring the roof over your head. Either way make sure you make the property tenants in common so your share is isolated and not part of their estate. Another consideration is what happens if your parents health, employent is not as expected. What if yiou lose your job? I take it wou would not want to force the sale of the house if the situation changed? What is the state of the property? Can you afford to pay your share of maintenance costs? All of this needs to be considered.

That said if you need/want to buy your own it will limit the scope you have to do this as it will count as a commitment. Conversely it would demonstrate that your abity to deal with a mortgage and help your credit history.

I doubt that anyone can give you conclusive advice. On the one hand you get a couple of promotions and decide to stay in your parents place for 5 years and you will own a good share in one house and an affordable mortgage in another. On the other you cannot afford the house you want next year when your new girlfriend annouces she is having twins! I think all you can do is consider all the things that could go right and wrong and decide for yourself.

SephirothX

It would be in the parent's name otherwise there will be no discount. Basically the £165 each is based on a quote from a mortgage broker. I've helped my dad find banks and speak to them directly but they all turned him down due to age, banks seem very reluctant/unwilling to lend past retirement age these days even if they say on their website that they would. So going to a broker has been a last option. I don't have the interests rate with me but they were around 3.3%, going up after 2 years or slightly higher and going up after 3.

"you pay £165 and dad pays £165 per month for 8 years is only around £32k without any interest added."

For a £28k mortgage? The £4k gap is the interest I guess. I think it was calculated based on a £29k mortgage though because there's associated fees. £400 broker fee, £800 solicitor and £300 valuation fee. I don't understand why we'd need a solicitor or a valuation when the council have already offered the house for £64k. Like why does it need valuating again or is that something else? And why is a solicitor needed? Seems like unnecessary costs.

paddedjohn

japmis wrote: »

If the mortgage is in their name then yes, obviously, it would affect the OP.

If the mortgage is solely in her parents name and they have an informal agreement then she isn't obliged to declare family loans.

I applied for a mortgage yesterday (which was approved) and they didn't ask if I had any debts to parents/family (which I don't have anyway).

If the OP goes for a mortgage in the future then they will need to see his bank statement, this will show that the OP has an outstanding commitment of £165 per month which will be taken into cosideration by the bank when deciding how much they can loan.

edit to add, it looks like the OP will be getting the mortgage so that will more or less ruin his chances of getting another one on his wage.

Mojisola

SephirothX wrote: »

we each pay about £165 per month towards an 8 year mortgage, which would be under his name.

I have been saving for a deposit and currently have about £16k in savings plus a bonus due in April. My income isn't big, £17.6k + annual bonus. No idea what the bonus is as this will be my first, estimating £2k. (Do mortgage lenders even take bonuses into account?)

I must add that I have no intention of buying my own place until at least next year, maybe the year after.

I'm in my late 20s so I don't want to live with them for the next 8 years.

One half of me wants to because it's a good investment for the future but the other half is worried about the potential consequences on the next 8 years of my life.

There are all sorts of possible problems which might not happen but it's best to think through the worst before you commit.

You will be committed to paying that money for next 8+ years. What's going to happen in your life in the next 8 years - meeting a partner, becoming unemployed, getting a long term illness - how would you pay your share then?

As well as paying the mortgage, you and your parents would be responsible for all maintenance and repairs. What if the central heating boiler needed replacing? Or the roof needed repairs?

If you move out, you will be paying for two homes at the same time. How are you going to manage that?

If your parents need residential care, the value of the house may be lost to care home fees and, with it, all the money you have paid out.