HELP ON- Taking On My Dads Mortgage

Fortune_500

BACKGROUND;
So basically the house is currently worth about £450k and we've lived here for just over 22yrs. With about £90k left to pay my dad is recently out of work and knows I want the house, he wants me to take on the mortgage officially. He and my mum will continue to pay all the household bills, so I'll have no outgoings and my mum works too. I earn on average £25-27k per year mainly through a combination of 2 main companies (employed) plus regualr work every month for one or two companies (self employed) and a bit from other companies (self employed) about 4-6 months of every year. About 2/3 of my income is on an employed basis but my monthly earning before tax are always £2000-2400, it has risen incrementally to this from about £1500-1800 at the beginning of the year. My current credit rating with experian is good (19 points shy of excellent) with equifax it's poor (although like experian this should increase when lenders update them with the correct info during the month). So basically by the time I apply for this mortgage I'll have about £1200 on the only credit card I'll have left plus £400 on a loan that expires in December and I've never missed a payment and have been on the electroal register for 11yrs. Oh and I'd often pay more than the minimum monthly amount (if allowed).

QUESTIONS;

1) Is it my earnings before or after tax that will be taken into account?
2) Will there be an issue with the fact that up to 1/3 of my income can be self employed (sometimes more if I take on lot's of extra work)?
3) Is taking income protection insurance going to increase my chance of acceptance?
4) Any further advice anyone could offer prior to me choosing a lender and making an application? i.e do I mention my mums smaller salary or the fact that I'll soon have no outgoings?

Thankyou for your help :A

AnotherJoe

Why cant you just pay the mortgage by passing the money to your parents?

This will avoid a huge amount of hassle and cost for you.

Do you live in this house by the way?

Fortune_500

AnotherJoe wrote: »

Why cant you just pay the mortgage by passing the money to your parents?

This will avoid a huge amount of hassle and cost for you.

Do you live in this house by the way?

Yes I had considered that myself, but the answer is that my dad is feeling stressed about having the mortgage to worry about whilst not having a job and being of the less employable age. He wouldn't be able to get a new mortgage or to remortgage, or so he beleives. And yes I do live in the house. The LTV incidentally would be about 20-25%.

AnotherJoe

Living in the house helps a lot on the hassle factor, but with your parents living there considerably narrows the number of lenders who will deal with you. As in down to a handful. See a mortgage broker.

Wouldn't your dad be satisfied if you just set up a standing order to pay him directly (or even the mortgage if thats possible). You can formalise this if you want eg you agree its a loan to them, this will help in future if there are ever issues with care homes and deprivation of assets comes up which might happen if they just give you the house now, as they wont have any equity in the house after this unless the plan is you jointly own it?

Given you would be paying rent if you weren't living there, I'd have thought a reasonable amount to pay your parents would in any case cover the mortgage unless its only got a few years to run? Or is it interest only? How long has it got to go?

Fortune_500

AnotherJoe wrote: »

Living in the house helps a lot on the hassle factor, but with your parents living there considerably narrows the number of lenders who will deal with you. As in down to a handful. See a mortgage broker.

Wouldn't your dad be satisfied if you just set up a standing order to pay him directly (or even the mortgage if thats possible). You can formalise this if you want eg you agree its a loan to them, this will help in future if there are ever issues with care homes and deprivation of assets comes up which might happen if they just give you the house now, as they wont have any equity in the house after this unless the plan is you jointly own it?

Given you would be paying rent if you weren't living there, I'd have thought a reasonable amount to pay your parents would in any case cover the mortgage unless its only got a few years to run? Or is it interest only? How long has it got to go?

Based on the age my parents are (60), it'd be paid off easily long before they'd be of the age where a care home or dabilitation could occur. Why would lenders be less inclined to do so if my parents and youngest sister (20) live there too? Currently there's 5yrs left to go, but at a much higher rate per month than what I could be paying it off at.
I could probably have the whole thing paid of within 10yrs. All I care about is the house as it's very preciouse to me and there's no chance I'd ever be moving out and they know they can trust me, so neither of us are worried about future equities.I'd prefer having the mortgage in my name so that I know the house (unless I was unable to pay) would never be sold. A standing order to my dad might be possible but as he's only got a years salary and no job, coupled with the house bills, I think to avoid the further stress it has clearly put him under he'd rather it go to someone who cares and can afford a re-mortgage.

Mojisola

Fortune_500 wrote: »

BACKGROUND;
So basically the house is currently worth about £450k

With about £90k left to pay my dad is recently out of work and knows I want the house, he wants me to take on the mortgage officially.

Fortune_500 wrote: »

Why would lenders be less inclined to do so if my parents and youngest sister (20) live there too?

I could probably have the whole thing paid of within 10yrs. All I care about is the house as it's very preciouse to me and there's no chance I'd ever be moving out and they know they can trust me, so neither of us are worried about future equities.

If you take over the whole ownership of the house for the value of the mortgage, your parents will have given you £360,000!

Even if it's some years down the line before care is needed, deprivation of assets questions may well be asked.

You will be taking any inheritance that your sisters might get if the house stays in your parents' names until they die.

You may think you know how the future is going to work out but if you die before your parents or have to go bankrupt or go on benefits and can't meet mortgage repayments or marry and then divorce, their home will be at risk.

AnotherJoe

Fortune_500 wrote: »

Based on the age my parents are (60), it'd be paid off easily long before they'd be of the age where a care home or dabilitation could occur. Why would lenders be less inclined to do so if my parents and youngest sister (20) live there too?.

Because they are people who might have a right to live in the house and would be difficult to evict, should you get into financial difficulties and they need to repossess the house.

Re the percent of your parents mortgage when the current period ends it's quite likely they could move to a lower fixed rate without any paperwork or needing to prove income etc.

Kynthia

Not many lenders allow the previous owners to remain in the property so you may struggle. Plus I'm assuming you have no deposit so you'll need a lender that will allow equity to be tge deposit.

You will own your parent's home. So they will be totally dependant for the rest of their lives on you not kicking them out ever, getting into financial difficulty and becoming bankrupt, getting married and then divorcing (as the property would be a marital asset), dying and leaving the property to someone else (eg a spouse), etc. A lot can happen in 20 or 30 years. Are you prepared to live with your parents for the rest if their lives, or would you move out and then possibly become a landlord with the responsibility and possible tax implications?

Why should your parents give away that much equity to you? It's crazy for them to do so and leaves them without options in the future. Never able to move elsewhere (either because they fancy a change or a more appropriate property), downsize or use equity release/lifetime mortgage to release money for things (travel, private medical treatment if something isn't covered on tge NHS, a new car, to fund a better than basic care home, etc). There could be inheritance tax due if they die within 7 years and it could cause issues or resentment with your sister due to uneven gift/inheritance from your parents with them possibly feeling bad too.

I don't think this is the best thing for your parents at such a young age. If you are thinking of them you will look into other solutions rather than do this or at least ensure they get proper legal advice so they can make an informed decision. You could go on a mortgage with them and have a deed of trust specifying what your share of the ownership is, they could look at ways of affording the mortgage until your dad finds work, they could downsize and be mortgage free, thry could see an independent broker for mortgage options, or see if any pensions are due to pay a lump sum soon that will go towards reducing the outstanding mortgage, etc.

kazwookie

1. I don't think you will get a mortgage on the information given.
2. Is your dad able to take a mortgage hoilday instead?
3. Is you dad able to get another job / agency work.

Fortune_500

Mojisola wrote: »

If you take over the whole ownership of the house for the value of the mortgage, your parents will have given you £360,000!

Even if it's some years down the line before care is needed, deprivation of assets questions may well be asked.

You will be taking any inheritance that your sisters might get if the house stays in your parents' names until they die.

You may think you know how the future is going to work out but if you die before your parents or have to go bankrupt or go on benefits and can't meet mortgage repayments or marry and then divorce, their home will be at risk.

Seriously, these are the reasons for a lender not giving the money, they're as weak as paper. "If I die then........".That could easily be said for my dad potentially dieing when he first took on the house and the family being left homeless. If I had issues with the repayments then that'd be covered by the insurance I could take out, but affording it would be easy and I have too many employers to be affected by unemployment. As I have aspergers I could never handle a relationship or marriage, too scary, plus no-one would ever be interested in me. The issue over how the money would be divided was discussed by my parents in regards to what my sisters would get, but again it's of little real consequence in the bigger picture.

Mojisola

Fortune_500 wrote: »

Seriously, these are the reasons for a lender not giving the money, they're as weak as paper.

They aren't reasons why a lender won't lend - they are reasons why your parents shouldn't hand over heaps of money to one of their children when they have many years of life ahead of them.