Can I buy my parents house

cherylmax

My parents are in their 70's and have an interest only mortgage with no repayment vehicle. I only found this out recently. Their house is worth around £215,000 with an outstanding mortgage of £136,000.
My husband and I would like to buy their house for £136,000 and would need a mortgage of 80% LTV to do this. They would live in the house and pay rent that would cover the mortgage.
I have two siblings and we would draw up legal documents that protect my investment of the 20 % deposit but also their inheritance of the equity in the house which would be about £20,000 each if prices remain the same.
I can't see that this would cause problems with HMRC as we appear to be under the thresholds for inheritance tax and capital gains.
From what I have read it would also appear that my parents can legally sale their house for whatever price they like so being under market value isn't an issue although stamp duty would need to be paid at market value.
Does anyone feel I have got any of this wrong or have any helpful information ?
Thanks

sandsni

I know there will be people along soon with more expertise than me but there are a few issues to consider -
(1) if your parents need benefits or care in the foreseeable future it could be seen as "deprivation of assets"
(2) you would have to get a BTL mortgage which could be difficult if you're letting to family (eg would you evict them if they stop paying rent for some reason)
(3) you would have to declare the rental income to HMRC (only the interest part of the mortgage would be tax-dedutable, although so would repair and maintenance costs etc.)
(4) you would become a landlord with all the responsibilities and legal requirements that go with it

Yorkie1

You will struggle to find a lender who will lend to you in these circumstances, I believe.

This will be a regulated buy to let because your parents will remain as tenants after the sale. Are you ready to become a LL, with all the legal duties and responsibilities that that entails?

There is also the issue of what will happen if your parents need means-tested benefits or means-tested care. The proposal means that they are deliberately giving away the equity in the house - deliberately depriving themselves of this money. They would be treated as if they still had this money, and therefore would receive no benefits.

Will they need housing benefit to help them pay the rent? If your parents got into difficulties with the rent, would you evict them? Would you be charging them market rent? The council may deem this to be a contrived tenancy and therefore refuse to pay out the benefit.

Finally, you cannot 'legislate' against other events in your life. What if you become bankrupt? Or split up from your OH? The property would come into the overall assets for consideration, leaving your parents potentially at risk.

What other plans have your parents made to pay off the IO mortgage? They must have had years to plan for this eventuality.

Annisele

You won't get a mortgage secured against your parents house on that basis.

Your mortgage lender will want to know that it can repossess the property if you stop paying. You're talking about "sale and rent back" arrangements - and if lender tried to repossess, your parents rights to the property would (probably) come before the lender's rights. That means the lender wouldn't want to go near an arrangement like that.

If you're able to get the money from somewhere else, it *might* be possible - subject to the issues others have raised, plus many more. Do you have enough equity in your own house to raise the capital that way?