intergeneration general help

jkg303

I need some general advice and help on which mortgage provider or broker is best for our situation if possible. Its quite long winded but i'll try keep it brief. My wife and i are ready to buy our first home after 14 years renting, due to my wife's parents complicated medical issues we hope to find a house with annex or living space for them to live with us on a permanent basis, they are gifting us a sum equal to around half the property value from the sale of there house. They do not want to be named on or be responsible for any part of the mortgage and are also not concerned about being included in the deeds, but for peace of mind they would like to secure around 80% of the initial gift should the house ever be sold. Value of property will be under the inheritance tax value. Many thanks J.

Thrugelmir

jkg303 wrote: »

They do not want to be named on or be responsible for any part of the mortgage and are also not concerned about being included in the deeds, but for peace of mind they would like to secure around 80% of the initial gift should the house ever be sold.

Then it's not a gift. The situation creates many complexities.

jkg303

We are under the impression that they can have a separate agreement drawn up, to give them the value equivalent to 80% of the gift upon the sale of the house if our situation ever changed, My wife is an only child and would be the sole beneficiary of their estate, we certainly don't expect this situation any time soon, but do need to be on hand to offer living support.

MortgageMamma

It can be done on a residential mortgage with gifted deposit from the parents. The parents can then have a second charge on the property of either the full gift or the amount they specify. This ensures that should there be a breakdown in yours and your wifes relationship or the property is sold that the gifted deposit returns to wifes parents. There are lenders who would be willing to do this and the size of your deposit will help, but you would have to ensure you fit their eligibility criteria and the property you choose is something they would be happy to lend on, so try to avoid listed properties or properties of non standard construction.


Also, I think under these rules because you are purchasing an annex for a relative who has/may have future medical needs and its all on one title deed you would avoid the second property stamp duty but you'd need to double check that bit with a solicitor.


Make sure you take good quality advice from both a mortgage professional and a good conveyancer. You are probably better using a conveyancer that is situated in the locality in which you are buying in, that you can sit down and discuss this with rather than a cheap internet conveyancing firm.


MM

Thrugelmir

jkg303 wrote: »

We are under the impression that they can have a separate agreement drawn up, to give them the value equivalent to 80% of the gift upon the sale of the house if our situation ever changed,

That's fine in principle. However there's also a mortgage lender involved in your case. To whom you are going to declare the money as a unconditional gift i.e. without reservation. They are not going to permit a second charge to be placed on the property nor recognise the second agreement. As that runs contrary to your declaration of a gift.

MortgageMamma

Thrugelmir wrote: »

That's fine in principle. However there's also a mortgage lender involved in your case. To whom you are going to declare the money as a unconditional gift i.e. without reservation. They are not going to permit a second charge to be placed on the property nor recognise the second agreement. As that runs contrary to your declaration of a gift.

There are lenders who will accept a second charge with a conditional gift of this type. 99% of them will not, but I did some CPD this week with a lender who specifically mentioned this scenario and said they would do it because of the family element.


A conditional gift is a gift that is not repayable over the term of the mortgage, but will be repaid from sale of property at some point, similar to the parent/child mortgages where the deposit is ring fenced until the childs earnings/equity can support the mortgage without it although in this case the 80k would be ring fenced until sale of property.


In this case the second charge would most likely be absorbed into the parents estate and dealt with according to will if they have one, or back to the elderly parents if still alive. The only potential issue is IHT but OP states parents estate is below the threshold.

jkg303

Just another thought! For arguments sake if we jointly bought a house with our parents for £200k they put in £100k cash deposit and we mortgage the remaining £100k although all parties would be responsible for the mortgage until paid, could they secure the 100% of the initial deposit if the house was sold? So if we sold it 5 years later for the same price they would retain at least the £100k equity they put in and we would only receive any additional equity raised following the mortgage payments?