Relocating Parents - buying a house for them?

zagubov

lionelflare1 wrote: »

I have spoken to my current mortgage provider and the bank where I hold my current account and they will allow me to borrow the money and gift it to them to buy a new property or pay off the existing mortgage. I can only do this If I am not expecting to get the money back. This would allow them to either stay in the property that they are in or possibly give us the option of them getting a property down here.

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xylophone wrote: »

Your parents sell up - they have £50,000.

You and your sister can borrow around £100,000 against your own properties?

You and she can lend this cash to your parents (a properly drawn up legal agreement) and take a charge on the property they buy.

They can pay you interest on the loan (will need to be declared) or you let it roll up.

Should the house have to be sold to fund care, you and your sister would have to be repaid your capital and any rolled up interest.

You would see a solicitor to make sure that all was done correctly.

This could be a way forward. Would the mortgage people be happy with this?

jamesd

What is their current and prospective income situation? How about expenses and how those might change?

Assuming both are between 55 and 75 are they at least both getting the £720 a year tax free that is available from pension use for those who have £3600 of unused personal allowance or the lower amount if that is not all available? This is obtained by paying £2880 net into a pension, waiting for the basic rate tax relief available even to those not paying income tax to be added then taking out the money. A person who is working can pay in more, up to their earned income, but will probably have some income tax to pay so they can't benefit as much percentage-wise.

xylophone

Would the mortgage people be happy with this?

Which mortgage people? Your parents won't need a mortgage under this plan.

You have indicated that you and your sister can release equity in your properties - you may do as you wish with the released equity?

You indicate that a house in your area will cost (say) £50,000 - if you and your sister can each release £50,000 in equity and lend this to your parents, they will own the house outright (presumably they will buy as tenants- in - common) and the interests of you and your sister ( and indirectly your mortgagees) are protected by the first charge which you and your sister will register against your parents' property.

Each of your parents will make a will - presumably each of them will make a will leaving his/her share of the house to you and your sister with a right to reside to the spouse.

You, your sister and your parents would need to take qualified legal advice.

missbiggles1

agrinnall wrote: »

Why do they have no means to pay off the mortgage? If this was a mortgage taken out 20+ years ago in the days of endowment mortgages what has happened to the repayment vehicle that would have been taken out at the same time?

It used to be perfectly possible to take out IO mortgages with no repayment vehicle, with the mortgage to be repaid on the death of the (second) borrower. The banks changed the rules and left many older people up the proverbial creek.:(

Mojisola

xylophone wrote: »

Your parents sell up - they have £50,000.

You and your sister can borrow around £100,000 against your own properties?

You and she can lend this cash to your parents (a properly drawn up legal agreement) and take a charge on the property they buy.

They can pay you interest on the loan (will need to be declared) or you let it roll up.

Should the house have to be sold to fund care, you and your sister would have to be repaid your capital and any rolled up interest.

You would see a solicitor to make sure that all was done correctly.

lionelflare1 wrote: »

I have spoken to my current mortgage provider and the bank where I hold my current account and they will allow me to borrow the money and gift it to them to buy a new property or pay off the existing mortgage. I can only do this If I am not expecting to get the money back.

Who has told you that you have to gift your parents the money instead of loaning it to them?

Has someone got mixed up with a 'gifted deposit"?

I'm another one who thinks xylophone's answer is the way to go.

lionelflare1

I have spoken to Nationwide who I currently have my mortgage with and they have told me I can remortgage to take out equity from my property and can gift the money to my parents, however I can only do this if I am not expecting to get the money back as this would make them financially dependent on me?
If I was to switch my mortgage to another lender would I be borrow more money off them, gift the money and expect to get it back?

My current property value £350000
Current outstanding Mortgage 205000
Nationwide have told me I can get about another £88000 to take me to about 85% LTV
I know this will mean a higher rate for me as the LTV will go up but I can swallow a bit extra if it works out (I guess I could even ask for more money from my parents to cover the greater interest on my Mortgage incurred from the increase in LTV?)

If I stay with Nationwide How would they know if my parents were giving me the money back to cover my extra costs?
Is the suggestion that My parents pay me the interest on the amount I borrow, I gain my lump sum back when the property is sold? (Possibly when they have both died) What would happen if they then sold the property and had to use the money for care? Would the debt to me be paid before the government look at how much money they have to pay for care? Or would they see that they have just sold a property and given me the money as a way of making it look like they couldn't pay for their own care?

Thank you everyone for your help with this.

Mojisola

lionelflare1 wrote: »

What would happen if they then sold the property and had to use the money for care?

Would the debt to me be paid before the government look at how much money they have to pay for care?

Or would they see that they have just sold a property and given me the money as a way of making it look like they couldn't pay for their own care?

If they needed care and sold the house, then they would have to repay their debts first - their ability to pay for their own care would be assessed on what was left after that.

I would hope that your loan to them would be clearly documented in a signed and dated agreement so there would be no dispute that the debt was real.

lionelflare1

Mojisola wrote: »

If they needed care and sold the house, then they would have to repay their debts first - their ability to pay for their own care would be assessed on what was left after that.

I would hope that your loan to them would be clearly documented in a signed and dated agreement so there would be no dispute that the debt was real.

Would this need to be something that was done through a solicitor? Sorry for my naivety!

xylophone

If you can afford to repay an additional loan from Nationwide (which presumably you can or they would not advance the money) why on earth should they dictate how you use it?

Anyway, are you now saying that if you can borrow £88,000 your sister will not need to participate?

Let us suppose that you manage to borrow the money and it is deposited in your bank account.

Your parents sell their property and have £55,000 in their bank account.

Your parents find a property selling at (say) £130,000 - this gives them a bit of wiggle room in respect of legal fees etc.

They see a solicitor and explain that they want him to deal with the purchase which will be partly financed by a loan from their son against a first charge on the property.

The solicitor will draw up a formal loan agreement whereby the loan of £88,000 from you is recorded and the charge registered at the Land Registry.

The agreement will record whether the loan is to be interest free/ interest paid regularly/interest rolled up until sale etc etc.

Remember that if interest is paid on a regular basis you will need to have regard to your tax position and if it is rolled up and paid with the capital on sale you could be receiving a large sum of interest in one tax year which may have an effect on your tax position.

Your parents will own the house outright, presumably as tenants-in-common and will presumably wish to write their wills in such a way as that each will leave the spouse a life interest but each will leave his/her half to children/grandchildren etc.

Should one parent require to go into care, the value of the house would be disregarded while the spouse occupied the property.

Should both require care, the house would have to be sold but as you would have a first charge on the property, you would have to be repaid before the balance of the money could be used for care fees.

jamesd

lionelflare1 wrote: »

I have spoken to Nationwide who I currently have my mortgage with and they have told me I can remortgage to take out equity from my property and can gift the money to my parents, however I can only do this if I am not expecting to get the money back as this would make them financially dependent on me?
If I was to switch my mortgage to another lender would I be borrow more money off them, gift the money and expect to get it back?

As an example some years back NatWest indicated to me that they were entirely happy to provide me a mortgage to be used to buy a property for a family member provided the property was not to be let to them under an assured shorthold tenancy. Nationwide's policy is not universal.