Buying parents' house

DoubleDragon

My folks are retirement age, though dad is still working, and they have £80k left on an interest-only mortgage with around five years left to run. They will have a very limited income when he does retire.
They are very stressed and embarrassed, and have assumed they will need to sell and go into rented accommodation.
I am trying to persuade them to get proper financial advice, but this is a battle.
I'm happy to help them as much as I can, as they paid off uni debts and helped me buy my first house, with the vague idea that I would release equity one day (this was pre-2005) but I'm now in negative equity.
I have a small amount of cash savings (£15k), and would like to go freelance soon, so want them get something sorted if I have to go on a mortgage.... I have a full-time job at the mo. The house is valued at £120k, but they'd struggle to get £110k in reality. They don't love the house, so a move isn't out of the question.
Any ideas on what's possible. A joint mortgage, buy the house off them?

holly_hobby

Hi there,

Ok, well they won't be able to secure another interest only mortgage without a repayment vehicle.

The alternative apart from selling and going into rented, is to switch to, or seek a remortgage on a repayment basis.

Obviously, as they will be paying back capital as well as interest, their repayments will be higher, which may mean that they want to seek a term that extends past their retirement - which as long as affordability is proven post retirement ie over the whole mge term, (and they have a clean credit record of course), it shouldn't be too difficult a fix.

If the only affordable term exceeds your parents 75th bday, then most high st lenders are out, but there are a few select lenders whom don't have this upper age ceiling, as long of course as their post retirement income is sufficient to support the repayments.

If you seek a joint remortgage with them, then again max term will be based on the oldest applicant, which may restrict the pool, and your own commitments will be assessed as part of the mix.

Say you pch from Mum and Dad to avoid the term restrictions, there are several further issues with regards to you buying their current home off them (even assuming income and status meet requirements/regulated BTL arrangement). This is becuase vacant possession can't be secured, due to the fact that they will be remaining resident post completion, which causes possession issues for the lender, and is therefore not permitted.

You could pch a different property under a regulated BTL for Mum and Dad, but as this would be a regulated product, affordability will based on your income and current commitments, which (along with a clean credit history) which may not be suitable.

So its a bit of a messy stew really ....

Ideally, I would keep myself off the mge, and if parents can't secure a repayment arrangement under their own steam, I would really sell and go into rented (as many peeps in this situ are having to do, the fact they aren't in love with the house, will obviously make the transition easier).

Hope this helps ...

H x

DoubleDragon

Thanks for that. They've assumed that they'll be unable to get any kind of a mortgage at the end of the current term and need to come up with £80k.
I'm not sure what their exact income will be, so I'm a bit in the dark. They've asked me to buy the house as they think that would solve everything, but don't understand that it's not that simple and possibly not the best option.
I'll have to work out whether an £80k mortgage with around 30% equity over a ten year term would be achievable. Then I could help them pay it down quickly.
We all have clean histories but pretty modest salaries, but a lot can change in 5 years!

holly_hobby

Speak to a broker to bottom out whats available to them.

Good luck

H x