Buying parents house

Xsarahk1977X

My parents have been looking into equity release on their house. I think it's a big mistake so have offered them to buy there house from them for them to live in rent free. The house was valued at 75k and they will accept 30k from me. Can I get a 40k mortgage using the ltv as deposit?

Keep_pedalling

This could be an even worse idea than equity release as far as your parents are concerned. What happens to them if for some reason you can no longer keep up the payments, the property forms part of a divorce settlement or you die before them?

Annisele

Xsarahk1977X wrote: »

The house was valued at 75k and they will accept 30k from me. Can I get a 40k mortgage using the ltv as deposit?

Very briefly, no.

In a bit more detail...

If you take out a mortgage in your own name, your lender will want to know that it can repossess the house if you stop paying the mortgage. But if your parents sell the house to you at an undervalue, in exchange for being able to live in the house for the rest of their lives, your parents will still have rights to the property. Will the lender's rights to repossess trump your parents' rights to stay in the house until death? Probably not - and so the lender won't want to take the risk of lending to you in the first place.

If your parents sell you the house free and clear - i.e. you pay £30k and they move out, with no expectation of living in the house again - then this might be possible. But I assume the point is that your parents get to stay in the house, so that's no good as a solution.

It also might be possible to get a joint mortgage, with you and your parents all named on it. But depending on their age, that could be difficult.

Do you already own a property? If so, borrowing the £30k against your own house and then either giving them the money or lending it to them (on an interest free basis if you like) might work.

Are your parents wanting equity release for the capital, or for income? If it's income, can you just pay them an amount monthly?

Xsarahk1977X

I don't have a mortgage in my name but my partner does. My parents mortgage is paid off. I would be buying as a first time buyer. My parents are 70 & 76. I have a full time steady job within local government so keeping up with the payments would not be a problem. They just want some cash as my mum still works but would like to retire. I have suggested they sell it outright and rent somewhere smaller, but they want to stay there so there is not the worry that they would sell it.

MerrilyA

Hello,

I think equity release is best used when it's for something that will give a return on invest like property investment, business investment or something of the like (of course with knowledge of what you're doing). For anything else it's probably not the way forward.

It depends what they want to use the money for and much they need. Could you not just give them the money or lend it to them?

steeeb

You'll need to do it without a mortgage involved.

If they want a monthly income I suggest drawing something up whereby you give them X amount for however long and they transfer the property to you. With acceptable 'get out' clauses to cover the major things that could happen in a fair way.

Things to possibly consider:
CGT if it's not your main residence?
Any other siblings to consider or anyone else they'd want to leave money/equity to when they're gone?
If they need care then this is potentially devaluation of assets (or the income you're giving them will count.. or both) will the amount you're giving them pay for care if required?

You'll need to consider what happens if they need a lump sum for some reason. What if you lose your job and can not keep paying them. Would they officially be tenants and would you need to do anything in that regard?

Lots of things to consider, so you need legal advice.

As a guess, I think it would be possible by having all 3 names on the house as tennants in common and having a solicitor draw up a deed explaining the terms and the equity as time goes by.

If you're all trusting and you're going to be the beneficiary anyway you could:
- Have them gift you the house, you let them stay in it rent free and give them X amount per month.
- Or.. Give them x amount per month to let them stay in the house and they give it to you in the will when they pass.

TBagpuss

Why not buy 45% of the house off them for £30K? he house would then be held in your and their joint names.
This would leave them the option of selling their remaining interest in the hosue if cirumstances change (for instance, in the event that one of them were to die and the other wished to move closer to you, or to sheltered or warden controlled property)

Since you would be paying open market value for the proportion of the property you were buying there should not be any issues with deprivation of assets if your parnets were to need care later on, and if you all get advice you can ensure that a declaration of trust is drawn up which secures your paretns position in the event of you divorcing or falling out with them and wanting to force a sale.