Parents selling house & want me to buy them new one with a mortgage

gcoops

Thanks again for all the input on this matter. On your advice I spoke briefly to a couple of brokers who are both going to check out a few things and get back to me but essentially their views are:

Being gifted £100,000 is not an issue. It will be my money I can do what I like with it. The only thing I will need is a letter from my parents explaining it is a gift because of the laws around money laundering.

One broker said this could have been done as a "Regulated Buy to Let" as Annisele suggests but few lenders are now doing these. Instead he says the transaction is basically a "Home for dependent relative" and should be feasible. The main issue being overal affordability of the total borrowing I have with my own residential mortgage. My buy-to-lets do not come in to the equation because they are self-funding.

The other broker suggested (but he wanted to double check) that this could be done as a residential "second home" mortgage and I just inform the mortgage company that my parents are going to be living there, keeping it safe when I'm not. Again, he said the lenders main concern will be affordabilty based on the total cost of my own residential mortgage and my income but being as I am only looking at borrowing a max of £100,000 and my own mortgage is pretty low this shouldn't be a problem if I am not borrowing more than 4 x salary which I won't be.

ACG

Anniselle has raised some good points on this.

Your replies make me think whatever gets said you will get this through by hook or by crook - in which case I think your post is pointless.

If you want to do this it can be done, but it will no doubt involve a few lies/bending of the rules and I would say bordering on (if not) mortgage fraud. Strong words but its a risky game if you get found out.

If this hit my desk, I would not be interested in it as to do it properly im not so sure it would go through and thankfully im busy enough to not need to risk my livelihood.

There are a couple of lenders who do still do regulated BTLs but they would not accept gifted deposits from the people moving in. I can only assume this is what a "home for a dependent relative" is as that is not a term I have come across before.

Its not a second home - so that would be a lie.

Its not a buy to let - so that would be a lie.

Anniselle has given you good information, but i get the impression it has fallen on death ears.

gcoops

All advice is greatly appreciated but so is discussion which is what I thought is the point of a forum. Not falling on deaf ears - I am taking the advice that was suggested including speaking to brokers (including one of the biggest independent mortgage brokers) and I am merely reporting back what they have said for the interest of those following this thread.

The whole point of posting on this forum was to hear varied opinion and I thank everyone for posting.

The other reason for posting was precisely because I want to do this properly and legally.

My replies are to clarify details, explore issues or make some aspects of my situation clearer. Not shoot down anyone who gives me advice.

I initially had doubts about "gifted deposits" but 2 brokers have said the money is mine to do with as I wish. I could buy a boat, a new car or a new house. They did not feel that was the issue. The issue is I want to borrow on a property that I am then not having as my main home.

I too have never heard of "home for a dependent relative" until now - I am merely reporting back the advice for the forum to comment on. But this is from one of the largest independent brokers. In fact if you Google "Independent Mortgage Broker" they come out pretty near the top. I could argue my parents are not "dependent" - they are realtively healthy and have their own independent sources of income. Not reliant on me at all.

Anniselle has given me good information and your impression is I'm afraid wrong because it has not fallen on deaf ears. But if you don't like reading discussion then don't read this thread anymore. Everybody else, thank you once again for all your input - my ears are wide open.

Annisele

I remain very doubtful about the "gifted deposit", mainly because I still don't think it's a gift. I think it's a payment in (part) exchange for having a property to live in for the rest of their lives.

Would your parents be happy signing a letter to say they'd given you a £100k gift? I'm not a lawyer, but I'd be very surprised if they could find a solicitor to say that was a good idea. It puts your parents at risk if you go bankrupt/get divorced/have some other catastrophe happen. And it would (IMO) put them at significant risk if you were to die before they do.

Annie1960

Annisele wrote: »

I remain very doubtful about the "gifted deposit", mainly because I still don't think it's a gift. I think it's a payment in (part) exchange for having a property to live in for the rest of their lives.

It sounds like a 'gift with reservation' to me rather than a gift.

http://www.hmrc.gov.uk/manuals/ihtmanual/ihtm04071.htm

time2deal

gcoops wrote: »

Yes, there is a risk that if for any reason the property is reposessed then my parents become homeless but if they are paying the mortgage out of their pensions or savings that is unlikely.

Even if your parents are paying for 'their' mortgage, the point is if you go bankrupt for an unrelated reason, or get divorced, then the asset will be treated as yours and split/sold as needed. Your parents are just tenants.

Unless they are not, and have a protected tenancy. In which case lenders don't like it as their security is basically unsellable.

Anyway, good luck. I think it is possible, but if it was me I'd try to find a way to have your parents have an equitable interest in the property. I looked at buying a flat for my parents near me a few years ago and the broker did talk about some kind of dependant relative mortgage. If you can support it with your income then I think it is possible, the problem is getting a lender who is willing to take on the risk.

gcoops

Annie 1960 - thank you for the link. I think "a gift with reservation" is really only an issue if it is being used to avoid inheritance tax but because my parents estate is below the threshold I don't think this should be a problem.

time2deal - yes, I agree there is an element of risk if I go bankrupt. However, if I fall upon hard times I'm sure my parents will help me out financially. If it comes to divorce, I have 2 buy-to-let properties plus my residential property for my wife to grab first although I may end-up having to move in with my parents. Better still, be nice to the wife!

I will look into your suggestion of my parents having an equitable interest in the property. I've no idea if that opens up a whole new can of worms but I will look into everything being suggested on this forum. And I am glad someone else has heard about dependent relative mortgages. An earlier post made me feel like it was something very dodgey even though it was mentioned to me by a very big, well-known mortgage broker.

Annisele

I've heard of dependent relative mortgages too, but I don't think they're any use where the "dependents" are gifting the deposit.

I agree with Annie that this is a gift with reservation; I think the reservation bit is the part where your parents get to live in the property. Gifts with reservation aren't just an issue with respect to inheritance tax - they can also be an issue with mortgages. If you google "gifted deposit letter" you'll find quite a few examples.

Slough Building Society's one would be no good to you - that requires your parents to declare they won't live in the property. (I know Slough BS is quite small; it was just the first link). Nationwide's is slightly different - there, you might be able to come up with some sort of family trust arrangement that satisfies the lender, but I still don't think you'll be able to just buy the property in your own name using your parents' money.