Parents buying house for us?

preecep

We currently live in the Midlands and are looking to move back to the our home town in the North. We have been trying to sell out property for a few months and have even reduced the asking price way under valuation but so far have had no luck. We have two young children (3 & 1) and a third on the way (due early next year). We have found a house up North and made an offer on it which was accepted. The offer was accepted on the condition we sold our property soon and moved quickly. Although our seller has been very patient with us we feel our time is starting to run out. We really need to be in before Christmas, the start of a new job up North, before baby no.3 arrives and to apply for a good school application for our eldest. With time running out we were starting to doubt this was going to happen, however, my parents kindly suggested they would buy the house for us (mostly cash but with a small buy-to-let mortgage). This would in effect allows us to move within the time frame we require. Our current house would become available without a chain and hopefully become more attractive. Once we sold our property we would then buy the new house from my parents. Obviously the tax man and solicitors would love this as we would be paying stamp duty and solicitors fees twice. What other fee's would this incur, ie: mortgage early exit fee, etc? Has anyone done anything like this before or have any suggestions/tips?

thesaint

Please note that if your parents state that they will/may be renting to family, the mortgage company may not lend on the property.

pleasedelete

They would be better buying your current house as a buy to let.

GolfFoxtrot

Often you couldn't take on a mortgage on a new house (the one your parents would buy up north) for 6 months after they first purchased it, it's a common t&c for most mortgage companies.

xylophone

Could your parents lend you the full purchase price of the house in the north on the promise of repayment as soon as your house in the south sells?

[Deleted User]

I am surprised to hear anything in the south is slow selling. I wonder if you need to look at why its being so troublesome to sell, otherwise it will continue to be unsold which won't help anyone.

preecep

Thanks for all the advice and feedback guys.

When i say we currently live in the south its actually the midland. Sorry, an old northern habit, anything south of Yorkshire is 'The South' to us common, larger drinking, uneducated lot up here

My parents do not have enough savings to buy the proposed property outright.

We should have around £80k equity remaining once we sell our current house and pay off the outstanding mortgage loan. The original plan once we sold our house was to buy the new property with a £65k deposit and a £200k mortgage.

A suggestion which has come up would be for my parents to loan us the £65k (would this be a bridging loan?). Take out the new £200k mortgage and buy the new house for £265. We would then repay the £65k back to my parents once we sold our current house. Does anyone know if this is legal or would we be entering tax avoidance territory? Also, would a mortgage lender allow us to do this given we would effectively have two mortgages/houses for a short period? My parents would probably act as a guarantor for the mortgage loan on the new property.

Cheeky_Monkey

preecep wrote: »

When i say we currently live in the south its actually the midland. Sorry, an old northern habit, anything south of Yorkshire is 'The South' to us common, larger drinking, uneducated lot up here

Sorry, can't help with your question but just wanted to say I know what you mean ...... us Soft Southerners think that anything north of the Watford Gap is Oooop North :rotfl:

booksurr

Cheeky_Monkey wrote: »

Sorry, can't help with your question but just wanted to say I know what you mean ...... us Soft Southerners think that anything north of the Watford Gap is Oooop North :rotfl:

anything the other side of the Thames is oop North to me

Watford Gap is no protection from those damn northerners, I prefer a nice river barrier to keep 'em out :rotfl:

booksurr

preecep wrote: »

We should have around £80k equity remaining once we sell our current house and pay off the outstanding mortgage loan. The original plan once we sold our house was to buy the new property with a £65k deposit and a £200k mortgage.

A suggestion which has come up would be for my parents to loan us the £65k (would this be a bridging loan?). Take out the new £200k mortgage and buy the new house for £265. We would then repay the £65k back to my parents once we sold our current house. Does anyone know if this is legal or would we be entering tax avoidance territory? Also, would a mortgage lender allow us to do this given we would effectively have two mortgages/houses for a short period? My parents would probably act as a guarantor for the mortgage loan on the new property.

there are no taxable implications for either you or parents in respect of a private bridging loan

sorry can'rt help with attitude of a lender to bridging finance. although i gather it is now rare and expensive in the commercial world so perhaps they will not like it at all

preecep

Ran the idea past a financial advisor and he thought the same. Even if the £65k deposit was gifted to us by parents a lender wouldn't loan us the £200k needed to buy the new house while we still have a mortgage on our existing property. Looks like we're living in hope we can secure a buyer for our current property so we can proceed with the purchase of the new one. If we have no luck my parents will buy the property and we will rent from them until we have sold ours. At which point we will buy the house from them (after the 6 month T&C period). The tax man, solicitors and mortgage lenders are about to make some quick bucks out of us!