Parent splitting there house and selling part to me

ethank

If they have a large interest only mortgage that they cannot repay in 12 years, why don't they start now by overpaying or converting to repayment mortgage to bring it down.

No lender is going to agree to a split of the two properties - it will damage the security they own in the property.

Only other option is to sell up.

simmo83

Thanks for all your comments, Let me give some me details so you can understand the situation. The area is great and kind of a dream location for me and my parents so they really want to stay where they are. The outstanding mortgage is 435k and the interest only is quite large so no real chance of paying down.


I have 100k for building works and legal.


From your comments my main concern is with the mortgage lender, however in my eyes this is a safer option for the mortgage lender as it will pay down a massive amount of the existing loan and my parents will then be able to get a repayment mortgage on the balance.

Annisele

From the lender's point of view, it's a massive risk.

Presumably the house is worth more than £435k now, so if the lender has to repossess it'll be able to get its money back. But what happens if your parents run out of money mid-build? The potential market for a half-finished split is rather smaller than the potential market for a 6 bed house.

I think the lender is very unlikely to agree. You might be able to remortgage with a specialist lender (maybe Buildstore?), but I'm not at all sure about that.

simmo83

TrickyDicky101 wrote: »

What are the amounts in question here (ie parents' current mortgage, price you would pay for your property, and whether you would need a mortgage yourself)?

Subject to advice but we would purchase for about 350k and would certainly need a mortgage. this would leave my parents with 80k mortgage on a smaller property(estimated value 350k) so would have a good LTV and would be able to easily pay on a repayment mortgage even in 12 years.

simmo83

Annisele wrote: »

From the lender's point of view, it's a massive risk.

Presumably the house is worth more than £435k now, so if the lender has to repossess it'll be able to get its money back. But what happens if your parents run out of money mid-build? The potential market for a half-finished split is rather smaller than the potential market for a 6 bed house.

I think the lender is very unlikely to agree. You might be able to remortgage with a specialist lender (maybe Buildstore?), but I'm not at all sure about that.

Could we not get the building works done first? Its a risk to us but they are willing to put us on the mortgage in the mean time?

Ozzuk

That raises an interesting question - you are potentially devaluing the asset significantly depending on nature/quality of the work (though also yes potentially increasing) but I don't recall any part of the planning or regs process that informs the mortgage lender. So how would they know! Yes, for the actual splitting legally (and for you to get a mortgage) you'll need to tell them and the most likely action is they will require the mortgage paid off (ie your parents remortgage with a new provider).