Parents remortgage - I pay the bill

Nalwoir

Hi, I have searched through the forums and online for this specific situation but couldn't find anything. Apologies if I break any rules, this is my first time posting.

My Mother and Stepfather own a house in the UK, but currently reside in Germany. They have a flat here (UK) that is completely paid off, and are thinking about selling it for some money to buy a place somewhere in continental Europe. Before doing so, they have offered to me the option to take on a mortgage against half the property. A cursory search seems to show that this is not a popular choice of lenders, so an alternative has cropped up.

The plan is for my parents to take out a remortgage against their property for half its current value, and for me to move in and pay them the money for the remortgage payments. In return, I would also get put on the deed for 50% of the property.

I know this seems somewhat unconventional, so I was hoping someone would be aware of potential issues that may arise from such an arrangement, and any tax/legal issues that this may pose. The current valuation of the house is £200,000, so the remortgage loan would be for £100,000.

Any advice on this situation would be greatly appreciated.

Thrugelmir

If your parents are non UK resident then obtaining a mortgage may prove somewhat difficult. That's before you get to family occupation of a let property and the tax treatment of the mortgage payments (rent ) that you'll pay. As the net profit from letting the property will be treated as taxable income in their hands. If you aren't named on the mortgage then you won't named as part owner either. .

getmore4less

Are there 2 properties it is not clear?

They could see you the flat for 1/2 price and you get a mortgage on the 1/2 you pay them and they gift you the rest.

that should not be a big problem as long as you can afford the mortgage, if they want to retain an interest in 1/2 that could cause issues.

Nalwoir

If your parents are non UK resident then obtaining a mortgage may prove somewhat difficult. That's before you get to family occupation of a let property and the tax treatment of the mortgage payments (rent ) that you'll pay. As the net profit from letting the property will be treated as taxable income in their hands. If you aren't named on the mortgage then you won't named as part owner either. .

So what you are saying is that the main problems could be:

- My parents obtaining a remortgage on a UK property while being resident in Germany.
- The payments I make being treated as rent, and taxable as such.
- Legally getting my name put onto the deed.

So secondary question - If I had the 100k ready to buy half their property, I could do so and be placed on the deed for 50% share and have us all listed as Tenants in Common. So why if I enter a legal contract with them to pay the 100K plus interest over a 25 year period would it be treated as rent instead of mortgage repayments. Can a private individual set themselves up as a 'mortgage lender' in such a way?

Tertiary question - Would it be easier for my parents and myself to enter into a mortgage for 50% of the value of the property, therefore all liable for repayments, and get myself put on the deed this way?

Are there 2 properties it is not clear?

They could see you the flat for 1/2 price and you get a mortgage on the 1/2 you pay them and they gift you the rest.

that should not be a big problem as long as you can afford the mortgage, if they want to retain an interest in 1/2 that could cause issues.

Apologies for any confusion. There is a single property here in the UK. My parents own it outright, and want to release half of the money to buy a place elsewhere (abroad). Due to my stepfather's income and owning the property outright he can get a competitive mortgage rate, whereas I have no funds for a deposit or anything. The situation has arisen as we are being kicked out of our current rental flat (landlord is selling up) and this gives us a opportunity to make some money towards a place that we have a stake in, while releasing money for my parents.

getmore4less

people can lend each other money and have it repaid without tax, if they charge interest that's income.

if they take out a mortgage and you pay them, then you are not paying back a debt to them as they have not lent you anything.

Nalwoir

Ooh, that's good to know. Thank you for that! I think I may need to discuss this with a solicitor and a mortgage lender to get their perspective.

Can you (or anyone reading this) think of the best way for me to enter into an agreement to take on 50% of the property for 50% of the value?