Should I help buy my parent's council house?

gizmo111

I think you're overcomplicating it.
How much rent do they pay at present - that can't be far off the £330 the mortgage will cost?
How much keep do you pay them at present?
I'd let them get the mortgage in their name, carry on paying the rent you do and let it be their house.
Maybe give them a years rent up front out of savings to help them with the fees and immediate repairs - that would be a help to them and you can carry on with your plans to save like mad for your own place.

embob74

I'm surprised nobody has asked if this is the best option for OP's parents?
As they are nearing retirement, dependent upon their pension income, they could be better off renting as they might be entitled to housing benefit.
If the house is sold in the future would that give enough to pay for a bungalow? And if a share has to go to OP any profit starts to dwindle rapidly.
Once you buy a house you are responsible for the maintenance and repairs which could be a substantial cost. Might be best to figure out if it would be more beneficial to OP's parents to save for their retirement rather than trying to make a profit to give OP a lump sum in the future.

SavvyStudentSaver

I'm sure it's been mentioned, but if you and your parents sold, and you got yur money, if anything happened to your parents within a time limit and they needed to go into care, wouldn't that count as deprivation of assets? Or if they passed (sorry to mention it), you'd have to pay Inheritance tax? Because technically, you're just gifting money to them.

Yorkie1

I've read the whole thread and am still confused. Is this correct:

You live at home with your parents, who are approaching retirement age (or at least your Dad is?), and they have been given a RTB price of £28K for their council property?

They have been to see a broker, who has located a mortgage which lasts for 8 years - at 3.3% for the first two or so years, i.e. £330 per month repayments, followed by an interest rate rise after that point, and then another rise after another couple of years or so?

You do not really want to be on the mortgage with them but to perhaps pay board & lodging instead?

Can your parents afford the mortgage on their own?

Assuming they cannot afford it alone, then I don't know whether the lender would permit board money from a family member to be counted as income in this scenario to raise the affordability figures. Hopefully others will know.

If board money cannot be counted, then presumably they would fail the affordability test and I would not expect them to get the mortgage.

The options then would either be for them to stay put renting it (which is not a bad idea for reasons already given), or for you to go on the mortgage as a joint applicant / owner. This is unpalatable for you, because it might reduce the discount and also it would prevent you getting another mortgage in the future whilst this one still runs.

Have I got the picture about right?

SephirothX

I think it's something like that Yorkie.

I don't think banks will take board into account, like 3 banks turned my dad down when we were looking for banks directly. I don't know how a broker is able to find a deal when I couldn't after carefully researching the internet, but that is after all what a broker is for. This broker (or the bank he has an offer from) must be confident that my dad can pay the mortgage even in retirement.

Certainly my share of the mortgage would more than cover board. My parents would get full housing benefit if it were not for the fact I'm living there so I have to pay money regardless. I only lose out in this when I move out into my own place because I will have my own rent/mortgage to pay for as well as this 8 year commitment. I figure by then it will only be a 6.5 year commitment at most however as I have no plans to move out this year.

The thing that worries me the most is all that stuff related to parent care. If they don't own a home the government would surely pay for care, but owning a home changes that and now someone brings "deprivation of assets" into the equation and inheritance tax. The former I've never heard of, and the latter I thought only applied to expensive homes way out of this price bracket. I also thought inheritance tax would only apply upon death.

Most likely the parents would go back to renting when they want a bungalow, sell the house, split the money and use their half to help their retirement. It's really an investment for both parties in that regard.

I haven't decided whether to go ahead with it because this old age thing is concerning. I don't expect them to need care homes within a decade, if ever because it would involve me putting them in against their wishes. It's just not common in our family for some reason and the recent scandals regarding care homes are enough to worry anyone approaching those ages. But it's still something to consider.

I wish I knew what kind of bonus I will be receiving at work as I'm sure that will be a factor in my decision too. But I'm not really expecting to find out for another month or two and it's quite possible by then the original valuation for the house will have expired. I don't fancy asking my boss now either as he might think "He sounds greedy let's give him a bit less!"

Mojisola

SephirothX wrote: »

and inheritance tax. The former I've never heard of, and the latter I thought only applied to expensive homes way out of this price bracket. I also thought inheritance tax would only apply upon death.

You won't need to worry about IHT. It does only apply on death and, for a married couple, if the estate is below £650,000, there will be nothing to pay.

SephirothX

Yeah I think the care home and deprivation of assets possibility are the main concerns now. I was reading up on deprivation of assets earlier and I can't find anything on how many years they look back when determining whether you have done this "deliberately". I'm not sure what they class as deliberate either, obviously giving me my share of the property is not deliberately depriving themselves of an assets to avoid a benefit considering the mortgage plan now but they may not see it that way.

My dad is almost 62 and mum is 59, both in very good health so I don't think this would even be an issue for another 15 years at least, or when one of them dies which could be 20 years given the ages my grandparents lived to. Both insist they never want to go into a care home so I could realistically assume it won't be an option before one dies. Thing is I'm their only child and what if I don't have the time to look after them if they need daily care? I may not even be living in the area if I change careers.

I've read you can transfer ownership of a property and keep living in it, that would mean they'd not be forced into a bungalow as soon as the mortgage is paid off in order to sell and give me my share. But what about transferring half ownership, is that possible? Does anyone in this thread know about deprivation of assets and how far they'd potentially look back?

So many things to consider and we had a letter yesterday saying there's 56 days left to decide.

goodmorningsunshine

You say in your first post 28K down from 64K, stupid me, but does this mean 28K for the house, or 28K from 64K leaving a price of 36K to pay?

Anyway another thought crossed my mind; don't know if it would work as I don't know too much about this, here goes anyway.

You have savings; buy the house with your savings, and get a loan for the balance. Make sure your name is on the title deeds and when you go for your mortgage, you can say you own part of a property already!!

Something like remortgage the property to pay for your 2nd property.

Would this work, I'm sure someone will be along to comment very soon.

Just bear in mind, that if for any reason the property was sold in the 1st 3-5 ?? (help - someone) years you and your parents may lose the discount that was given to them in the 1st place.

Commitment is scary, I should know, didn't buy my 1st property until I was over 50 years old. Imagine !!!

What are you waiting for ?? Go for it. If you worried about anything and everything that might happen, there would be no point in doing very much then, would there.

As for looking back I think it was 5 years but has been increased to 8 years last I heard.

keep us posted

SephirothX

It's 28k after discount but £29k mortgage due to the additional fees.

I've read the council can look back as far as they want when it comes to "deprivation of assets". That expensive holiday I'm going on later this year could affect my benefits for care in 50 years time for example of the council wanted it to. Of course they're only likely to look back a reasonable amount of time but then what is that?

I'm not keen on blowing all my savings to buy the house, or at least putting it all towards the mortgage. That really would screw me over. And I am aware of the 5 year rule with regards to selling it, guessing that would also apply if they were to transfer it to my name.

I don't fancy the mortgage in my name but I am tempted to take the risk and get the parents to transfer the house to me in 5 years time. Maybe even we could pay the mortgage off early then too if my income is high enough. Funny enough when my dad hits retirement age he'll have more income because he plans to keep working and he can draw his pension. Mortgage providers don't take into account the possibility you won't retire at 65 though. Quite silly considering it's getting more common and the retirement age will be increased soon.

Yorkie1

If you transfer the property to your name after 5 years, your parents will have absolutely no security of tenure at all. That is a very vulnerable position for them to be left in. And it's 5 years later for deprivation of assets to kick in.