Take a mortgage for my parents?

nink_2

My parents are in what I see as quite a sticky situation. They have both recently retired with no income, high credit card debt and a mortgage still to pay.

House is worth about £400k and mortgage left is £134k. Credit card debts amount to £40k.

Funds left from a small savings pot are gradually running out and they are looking at going for a mortgage for life equity release type option.

I'm very worried about this as it seems like they are giving they're house and everything they've worked for away. I thought there mst be a better way!

I am age 30 still struggling to get on the housing ladder so could me buying the house for the value of debt that's left benefit both my parents and me?

I not sure what the risks are but were thinking about 2 options. First, I take a mortgage of £134k and they pay me rent at market value which should cover 100% repayments. Effectively we would agree the house minus any costs incurred belongs to my parents.

Second option might be I take a higher mortgage to cover total debt and put in a percentage my own extra money each month to agree to own a small proportion of the property.

Both options I was thinking would a buy to let arrangement work. Have lots of questions though...

1 does the overall logic work and which is best option.
2 could I get another mortgage as I still want to live in my own home in long run and I feel like time is ticking for me?
3 do I need any financial deposit if I am effectively buying a £400k house for much less? I only have a few k spare at the moment and don't own a property yet

Anything else I should be worried about?!

Thanks

Nikki

whitewing

Why don't they just sell up and move somewhere smaller?

I would advise you against getting involved in trying to sort their messy money situation. My experience with family is that they get into a mess because they refuse to take responsibility for themselves and they expect (even demand) others to sort it for them whilst not helping themselves. Then what you want for yourself (eg your own home or relationship etc) is never a priority for them.

Seriously, don't do it.

Guest101

Personally I wouldn't do this, you are in a financial commitment on the property, you must buy the full property, ie it must be yours. If they choose to sell it to you for 135k, that's up to them. If you plan to rent it out, you must get certificates and insurance and permission from you lender, you must also have 5-10% deposit as a minimum so 13.5k.

You could get another mortgage, but there is no guarantees, your circumstances could change.

I'm sorry to be blunt, but this is very poor planning on their behalf and burdening you with it, is very unfair.

Is there any reason why they would not sell the property and downsize? if they hve 260k in the property they should be able to buy outright?

nink_2

They want to stay in their house, this house until they die. They have worked hard for it all their life and I want to help them, they are my family. I also thought there might be a small benefit to me and the rest of my family, my sister, my nephew in the end and in the long term...

nink_2

By the way. They haven't asked me for anything. This arrangement is entirely of my own idea! I haven't even suggested it to them yet. Just want to get some feedback before I do.

Also, they already tried to sell the house was on market for 18 months and not even a sniffle of a viewing. People just don't seem to have the money to buy this much property at the moment! Time and money is running out and we don't have a choice at this point now really.

Herbalus

nink wrote: »

My parents are in what I see as quite a sticky situation. They have both recently retired with no income, high credit card debt and a mortgage still to pay.

House is worth about £400k and mortgage left is £134k. Credit card debts amount to £40k.

As an honest question, how do they expect to pay £175,000 if they both stop working and have no income?

From what I see, they have no option but to sell the house.

whitewing

Do they not have some pension facility?

Guest101

nink wrote: »

By the way. They haven't asked me for anything. This arrangement is entirely of my own idea! I haven't even suggested it to them yet. Just want to get some feedback before I do.

Also, they already tried to sell the house was on market for 18 months and not even a sniffle of a viewing. People just don't seem to have the money to buy this much property at the moment! Time and money is running out and we don't have a choice at this point now really.

I get where your coming from, but its not true people dont have the money, some agents are better than others at marketing properties for sale.

It's up to you, but if they cant pay the rent for whatever reason, you are left paying mortgage and rent/mortgage on your own place.

Speak to a mortgage consultant, see if they will lend to you, go from there. If you had the funds now, i'd say go for it, property is a good investment in the long term. The lenders may have a problem with the price etc

ash28

nink wrote: »

By the way. They haven't asked me for anything. This arrangement is entirely of my own idea! I haven't even suggested it to them yet. Just want to get some feedback before I do.

Also, they already tried to sell the house was on market for 18 months and not even a sniffle of a viewing. People just don't seem to have the money to buy this much property at the moment! Time and money is running out and we don't have a choice at this point now really.

TBH, it's pretty poor planning by your parents.....if they are relying on state pensions and have £134k outstanding mortgage and £40k outstanding debt....however their position is their position.

Equity release or a lifetime mortgage could be the answer but any monies would have to be used to pay off the mortgage - you normally have to be mortgage free.......the amount they would be able to raise, if any, would depend on their ages and health...the younger and healthier you are the less you will be able to realise.

They might want to stay in the house but in reality can't afford it - could they afford it without the mortgage and debts ? We have a big house and are early retired and I know for a fact we couldn't live here if we only had state pension income and both of us will be entitled to full state pensions at the new rate when we reach 66. We don't have a mortgage or debts, but we would struggle with general living plus the running costs of a large house on 2 state pensions.

If they sell it to you for the outstanding mortgage amount and if they need care in the future they could be classed as having given part of their house away.....

If they sell it to you and you get married and then divorced then your spouse could be entitled to half of your parent's house.

If they sell it to you and you are made bankrupt.........they could be evicted as they wouldn't own the house.

If they sell it to you and you fall out......you could have them evicted......

I would never under any circumstances sell my house at a heavily discounted price to any of my children.

The most logical thing for them to do, IMHO, is to sell the house and downsize.....if it was on the market for 18 months and it didn't sell then the price was too high. Their house might not be worth as much as they think it is.

We sold ours 18 months ago....in the same price bracket as your parents and it sold within 3 weeks. We bought a bigger one!!!

We all want the best of both worlds....unfortunately for most of us that isn't possible and some hard choices have to made.....

martindow

nink wrote: »

They have worked hard for it all their life and I want to help them,

Sorry to be blunt. While I appreciate your wish to help them, they have not really worked hard enough presumably having chosen an interest only mortgage and are now in a muddle.

But they are in the fortunate position that a house they bought for probably 150k is now worth 400k. This is house price inflation and nothing to do with hard work, but it does leave them an option of being able to sell and buy a smaller house outright. They may wish to stay in this house indefinitely but if they can't afford to do so they do have a way out of their financial difficulties.

nink_2

Taking out all the emotions, facts are:

They will have enough income to continue to pay rent at market value approx 700-800 per month ( yes sums don't add up but that because the house has an annex so they would rent 3 bed part annex has 2 more beds ). Annex will remain empty it is too expensive to let due to high gas costs ( in a village moton gas grid so on LPG).

They will not sell, it is no longer feasible at this point they either default and lose the house or take the equity option. Or sell and potentially be left with it enough to buy a reasonable place where they are.

The equity option has been approved and will cover mortgage so they will be free from that but not from the card debts.

Can we try to leave out emotions, this sites about money after all so financially what is best and feasible option ? There must be some financial benefits to all here?