Buying my parents property at 20% of its value

TallBox

Hi

My parents are 70 years old now (retired) and have a £90k mortgage remaining on a property which is currently worth around £470k. The problem is that with their retirement, they are struggling to keep up with the monthly mortgage payments.

Common sense dictates that they should sell up, downsize and sit on the cash. But this is where common sense conflicts with sentiment; it is the home they've built over 20 years, the childhood home of my sister and I.

Given that the monthly payments are too high for my dad, I thought the way to get the monthly payments down would be to remortgage over a longer period of time. Since he's 70, this is a problem.

My sister and I have the idea of buying the property (and so transferring the mortgage to us) at a price of £90k. We would then borrow out over a period of 25-30 years, and the monthly payments would come down to an amount that my folks can manage. (We live with our spouses elsewhere, and this would be the second or third property for us).

Is this possible? And what are the risks/disadvantages of doing this?

Thank you for your advice!

Browntoa

if you are looking to protect the value of the house from care home fees then this is classed as "deprivation of assets" and would not stand scrutiny in the future

TallBox

Thanks for your response. We wouldn't put them in a care home, we'd bring them in with us or with relatives abroad.

Would this affect that opinion?

andyfromotley

It also wouldn't help you escape any inheritance tax. Unsurprisingly the revenue are very clued up to house being sold very cheap by elderly people to family!!
You may want to discuss matters with a tax planning solicitor or accountant.

Other than that of course its the right thing to do to help out ones elderly parents.

Browntoa

not sure how a mortgage lender would feel about lending on a property under these terms , blurred ownership , undervaluation etc

you would still need to pay the stamp duty at full market rate

TallBox

Thanks both for your advice. Not trying to weasel out of tax or whatever fees are rightfully owed (though would obviously welcome legal ways of minimising our fees and I think we would not hit the threshold for IHT).

But would just like to find a way to allow my parents to remain in the property whilst making the monthly payments a little easier for them.

stator

I think you need specialist financial advice on this one, but it sounds like a very nice thing you want to do.

The alternative is equity release. They sell a portion of the house to repay the mortgage and once they both die the house is sold, some of the value goes to the equity release company and the rest goes to the estate. Using that option would require specialist legal advice too, there are some less than reputable companies out there!

SandC

Why don't you and your sister just pay part of or the rest of the mortgage for them, by way of helping them out?

That way, no deprivation of assets, they will remain in the property and you and your sister would inherit when the time comes (dependant on any care home fees that is, but their home would not come into consideration where one of them were still living there).

fed_up_and_stressed

You could just gift your parents the cash for the repayments if the only concern is security of their home

kingstreet

They could not continue to live in the property if you did this.

Why not just pay the mortgage for them each month?

Thrugelmir

How long has your parents current mortgage term yet to run?