Take a mortgage for my parents?

lawriejones1

Realistically, they have to sell the house, pay off their debts and move somewhere they can afford.

Meaning no disrespect, I don't think they can afford to retire. If it were me, I'd be working at B&Q, Tesco or whatever and let my children live their own lives. It doesn't seem particularly fair to me.

sandsni

nink wrote: »

Taking out all the emotions, facts are:

Taking emotion out of it:-

(1) Do you actually earn enough and have a good enough track record to get a morgage in the first place?

(2) If you're not personally living at the house you would have to get a BTL mortgage which would be difficult if you'll be renting to family (eg would you be willing to evict them if they stop paying rent?). Alternatively, if you're currently living at the house, what happens if you meet "the one" and want to buy a place of your own together, but you're tied to a mortgage on your parents' house?

(3) You would have to declare any rental income to HMRC. Only the interest portion of the mortgage can be offset against tax, not the repayment portion. If you are already paying income tax via PAYE you would more than likely have to pay tax on the rental income, even if it was barely covering the mortgage.

(4) You would become a landlord with all the legal responsibilities that entails - are you ready for that committment and to pay for whatever repairs and maintenance arise regardless of whether you're getting any rent?

You might think you're doing your parents a favour by getting them out of this hole, but they might actually be better off selling and downsizing, even if it means losing some of the perceived equity. If the money owed on the mortgage is so much less than what you say the house is worth, then they could afford to drop the price considerably and still have enough to buy a small place mortgage-free.

Also £40k of credit card debt at retirement is quite considerable. Are you sure, even if you bail them out now, your parents wouldn't end up in the same hole a few years down the line?

gardner1

how old are your parents as if they are retirement age 60-65 then they havnt planned very well
as others have said only option is sell and downsize also you say it was for sale but no takers/offers,which means the house is over priced

seriousDFW

nink wrote: »

Taking out all the emotions, facts are:



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?

You obviously just want someone to agree with you, regardless of realities. Some knowledgeable people have given some really good advice here, even if it isn't what you wanted to hear.

It has already been stated: the best and most feasible option is to sell and downsize, for the many reasons given already. If you or your parents don't like this option, that is absolutely fine, but just because you don't like it, doesn't mean it isn't the best and most feasible option.

By the way I really appreciate you want to help your parents but this does sound very messy and I fail to see how it benefits anyone really, but I admit I don't really have any specialist knowledge or experience in this area.

tabby_cats_mum

Personally I would just use whatever spare cash I had and help them pay off their debts or mortgage, treating it as a gift.

No personal experience but a friend is in a very similar situation to you with her parents and after much soul searching they decided to go this route, however I often have to calm her down after she's paid a bill or debt for her parents and her mother has decided that she will go out and buy new shoes/clothes etc despite having wardrobes full (that's one of the reasons they got into the mess they are in).

You don't know yet if they'll need care at any point and if they do you can wave bye to any inheritance anyway.

A lot of BTL mortgages stipulate you can't rent to family so you may have trouble getting a mortgage.

There are plenty of threads on this forum showing that getting involved in family members money problems is not a good idea.

I know you want to take emotions out of it but how can things ever be anything but emotive when it's your parents.

mrginge

Why don't you just pay the mortgage for them?

ash28

nink wrote: »

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?

The best and most feasible option is for your parents to sell and downsize.

The worst option for your parents is for you to buy their house on the cheap......it takes all control away from your parents and gives it to you with all the ramifications outlined in previous posts - ultimately your parents could end up homeless....it is usually a recipe for disaster. It could impact any benefits they might want to claim as they could be deemed to have gifted you the difference between the full market value of the house and the price you paid.

If you really want to buy their house then buy an interest in it and have a deed of trust drawn up laying out the why's and wherefore's and who pays for what and who gets what.......

They really need legal advice on what each option means to them, including equity release. Does the equity release scheme work on a company buying a percentage of the house that has to be repaid after death or on a mortgage where the interest rolls up every month?

Your advice to them should be to get independent advice.

kingstreet

nink wrote: »

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?

Two issues. The first is a mortgage lender will not accept a "purchase at undervalue from a family member" if the family member will continue to live in the property.

Second, if they sell to you and later need council-funded care, disposing of an asset for such a price could be deemed intentional deprivation of assets

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

That makes it a regulated BTL with a family purchase at undervalue for owners who will become tenants. I do not think that would be acceptable to a lender.

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

Any residential mortgage would have to include your parents as borrowers if they will also be joint owners. Again, issues for a lender such as age, income etc.

I would simply allow them to research their equity release, let them enjoy the money they have accrued if the correct route for them and see if they will gift you a deposit for a place of your own.

Yorkie1

ash28 wrote: »

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......

sandsni wrote: »

Taking emotion out of it:-

(1) Do you actually earn enough and have a good enough track record to get a morgage in the first place?

(2) If you're not personally living at the house you would have to get a BTL mortgage which would be difficult if you'll be renting to family (eg would you be willing to evict them if they stop paying rent?). Alternatively, if you're currently living at the house, what happens if you meet "the one" and want to buy a place of your own together, but you're tied to a mortgage on your parents' house?

(3) You would have to declare any rental income to HMRC. Only the interest portion of the mortgage can be offset against tax, not the repayment portion. If you are already paying income tax via PAYE you would more than likely have to pay tax on the rental income, even if it was barely covering the mortgage.

(4) You would become a landlord with all the legal responsibilities that entails - are you ready for that committment and to pay for whatever repairs and maintenance arise regardless of whether you're getting any rent?

kingstreet wrote: »

Two issues. The first is a mortgage lender will not accept a "purchase at undervalue from a family member" if the family member will continue to live in the property.

Second, if they sell to you and later need council-funded care, disposing of an asset for such a price could be deemed intentional deprivation of assets

That makes it a regulated BTL with a family purchase at undervalue for owners who will become tenants. I do not think that would be acceptable to a lender.

Any residential mortgage would have to include your parents as borrowers if they will also be joint owners. Again, issues for a lender such as age, income etc.

In addition to all the above reasons why this really isn't a good or viable idea, I believe that BTL mortgages usually need 25% deposit, and many require the applicant already to own a house rather than a FTB.

For all these reasons, your plan is essentially a non-starter and, while your desire to help out your parents is understandable, you need to get them thinking about alternatives.

BitterAndTwisted

They have made this mess for themselves, so let them figure out a way of extricating themselves from it. They have £200k of equity, so they should be selling up, paying off all of their debts and buying something else outright if they can then afford the running-costs on what income they do have.

Your parents are fools. Do not let their foolishness drag you down with them.