Buying a house with my Dad - what do I need to consider?

Nashville

Hello everyone, first time poster here looking for some advice please!
After much discussion, my Dad (property#1) & my husband & I (property#2) are looking to sell our current properties and pool our money to buy something bigger.
Dad is in his 60's, we are in our 30's with a young child.

Dad would be putting in cash from the sale of his property. We would have a little cash from the sale of our property, plus a mortgage (in just mine & my husbands names).

Is there anything I need to be considering around legal issues / money issues etc? Obviously we need to think about how we will split bills/utilities/maintenance costs etc. Also thinking about wills and inheritance, I am an only child and my Dad is a widower so if he died, his estate would pass to me. Is there anything we should consider to help us reduce the amount of inheritance tax I might have to pay?
I've thought about the possibility that we may have to pay for care of my Dad one day - he would still have significant seperate savings available to fund that.

I'm not looking for advice on whether it's a good idea to move in with ones parents or not practically or emotionally - we've given this a lot of thought from that perspective!

Thanks in advance.

BitterAndTwisted

To give your father security it should be purchased and mortgaged in joint-names but your father is likely too old to qualify for a mortgage, so how do you propose to protect your his interests?

jennifernil

I don't know if things have changed greatly in the last 25 years, but it feels like it when this sort of thing is discussed on here!

I think a lot depends on trust, and how solid your relationship is.

Like you, I am an only child, my Mum was a widow. Back in 1987 (I was 39, OH 45, kids 17 and 2 (mm, big gap), and mum was 64) , we sold our house,which released about £45k, she sold her house (mortgage free) and put in £50k, we took a mortgage of £45k.

We purchased a plot for £25k and built a house with a good sized "granny flat" , and 4 bedrooms/3 public rooms for us which ended up costing £160k, the difference was what we put in out of income over the 2 years before we stopped counting!!

We all also put in a huge amount of our own labour (even Mum) .....OH fitted 2 kitchens and utility room, made units for 3 bathrooms, tiled 3.5 bathrooms, 2 kitchens and utility room, installed telephone and TV wiring, put up all the light fittings, we laid the driveway and paths and landscaped the garden, laying slabs and building retaining walls etc, etc , Mum was a great help in the garden, .......I am still amazed at all we did!!

Anyway.....we were a settled couple, Mum knew we would never part, so was happy to give me the £50k towards the house without any sort of security, only OH and I were on the mortgage. Even if we had parted, she knew she could depend on me to see she was OK.

25 years later, Mum is unfortunately no longer with us, but we are still here in the house. Just the 2 of us now. Planning a re-organisation of the rooms once the kids finally remove all their remaining clutter!!

tim123456789

BitterAndTwisted wrote: »

To give your father security it should be purchased and mortgaged in joint-names but your father is likely too old to qualify for a mortgage, so how do you propose to protect your his interests?

There's no reason why the father can't own a percentage share in the house appropriate to the sum that he puts in, with the rest belonging to the "family" with the mortgage

I know that there are stories that you can't get a mortgage like this, but I can't see any reason why it should be like this

tim

sammyjammy

tim123456789 wrote: »

There's no reason why the father can't own a percentage share in the house appropriate to the sum that he puts in, with the rest belonging to the "family" with the mortgage

I know that there are stories that you can't get a mortgage like this, but I can't see any reason why it should be like this

tim

The mortgage has to be in the same names as those on the Deeds i.e. all parties.

Nashville

Thanks for your happy story Jennifer - good to know it can work!

Bitter - I am definitely concerned about protecting my father's interests, particularly if my husband & I were to divorce (eek!) or if I were to die (double eek!). I was thinking that the mortgage would be in joint names with my husband & I, and that the house deeds would be in all 3 names (husband, Dad & I).

Tim how would we go about documenting the percentage share? Would it just be a document drawn up by our solicitor?

Thanks again for the input so far

Rain_Shadow

What would happen if your father met someone else?

TBagpuss

You can get a declaration of trust drawn up - it may be that you and your hsuabnd will need to be the legal owners of the property and to hold as trustees for yourselves and your dad.

You do all need to get separate advice, and to make sure that you are clear about what will happen in different scenarios;
e.g.
- If the shared living doesn't work out and either you and your husband, or your dad, want to move back to living separately
- if your dad has to go into a care home - whether and at what stage could the council force a sale of the property to free up his interest to pay his care home costs.
- if you and your husband separated - whether and when a sale ofthe property could be forced, and what would each of you be entitled to from the sale.

Be aware that there won't be a single 'magic bullet' -the arrangements which are most beneficial in relation to inheritance tax planning and reducing potential liability for care home fees are likely to give your dad the least protection in the event that you and he have a falling out in future, or in the event that you and your husband split up, and vice versa, so you will need to consider the options and what to prioritise.

You may also want to consider having a separate written agreement that sets out the arrangements about how bills will be split, who will pay for costs of any home improvements etc, and consider things such as whether the shares you each have in the property will change if (for instance) you build an extension or your dad installs an en-suite, and any ground rules about coming into each others parts of the property etc ( often discussing these issues, with a view to drawing up a 'living together' agreement can help avoid problems as it ensures that you've all talked about your expectations, and have the opportunity to come to a compromise where you have different expectations!)

tim123456789

sammyjammy wrote: »

The mortgage has to be in the same names as those on the Deeds i.e. all parties.

Why?

This just seems to be a rule made up for no (or little) reason.

Just why is it not possible for two people to share a house purchase, one buying their half for cash and the other buying their half with a mortgage?

It makes no sense.

(In any case I was expecting the mortgage needs to be the same as the occupants reply. I know that you can share ownership of a property without being on the mortgage, if you aren't an occupant, because I am in exactly that position with my sister's house.)

tim

tim123456789

00ec25 wrote: »

its a very clear reason that has been explained umpteen times on here

if you are an owner but not on the mortgage then if the lender needs to repossess they will have added complexity since the other owner is not party to the mortgage and has rights of occupancy which could frustrate a repossession.

Therefore lenders prefer all parties on the deeds to be on the mortgage. Also of course gives them more people to chase if a payment defaults

Oh so they "prefer" it!

so it's not a hard and fast rule then

tim123456789

00ec25 wrote: »

this board is about giving advice not misleading people by ignoring possibilities.

Exactly.

That is exactly why I am querying it. So that the OP can get the best solution here.

I'm querying the "firmness" of the rule to see how it can be circumvented as ISTM, it's the best solution for the OP and doesn't present any real legal difficulties.

Just made up ones.

I don't buy this: The mortgage holders don't want the problem of having to evict the "non mortgage holding owner" issue.

There are lots of cases where dependent family members could cause problems for evictions when mortgage companies want to re-possess. But the reality is that mortgage companies rarely do re-possess and making up rules to avoid a little extra work in 1% of 1% of cases just seems like making a mountain out of molehill here.

tim