Buying Parents House (They still have mortgage outstanding)

AdrianC

<sigh> I'm clearly too subtle.

So perhaps you'd like to share with us what the APR is, and how long until it's fully repaid? At that rate, and assuming 4% APR, it's not going to be very long at all - about four and a half years. Reducing payments that much would simply extend the repayment date massively - to about 19 years - and increase the total to be repaid by about £30k.

agrinnall

Downsizing to a property they can pay for outright from their current equity would seem the obvious solution.

xylophone

Your parents have insurance in place to cover repayment in full should either of them die before the term is up?

ookoro

AdrianC wrote: »

I cannot see how an £80k mortgage can possibly be costing them £1,600/month. Assuming it's a normal 25 year repayment mortgage, that would be about 24%APR interest.

Even £500/month would be nearly 6%.

£80k is what is left outstanding on their mortgage from when they bought the house and their term was less than 25 years.

ookoro

xylophone wrote: »

Your parents have insurance in place to cover repayment in full should either of them die before the term is up?

Yes they do, but they can't afford to pay it off if my dad has to stop working, which is only a matter of time, or has to cut down significantly

ookoro

mrginge wrote: »

Why don't you just pay their mortgage for them?

I currently can't afford to pay £1600 a month as well as my rent, nor would I be able to afford to pay £500 a month, but I will be able to afford about £150 and as my salary increases I could afford more. It would buy us time in terms of financial pressure for them, if that makes any sense.

ookoro

teddysmum wrote: »

There is also the a possible case of deprivation of assets, should either parent need residential care. By selling for just the outstanding mortgage amount they would be giving away a much larger sum. Carewise, they would be treated as though they still had the money, so no LA help.

Thanks I'm looking into this

ookoro

AdrianC wrote: »

<sigh> I'm clearly too subtle.

So perhaps you'd like to share with us what the APR is, and how long until it's fully repaid? At that rate, and assuming 4% APR, it's not going to be very long at all - about four and a half years. Reducing payments that much would simply extend the repayment date massively - to about 19 years - and increase the total to be repaid by about £30k.

Not sure of the APR unfortunately, but you make a good point. I think there's about 4/5 years left. I also think it's an interest only mortgage and they are making over payments to be able to clear the outstanding at the end of the term. Sorry I don't have more precise information.

AdrianC

ookoro wrote: »

I also think it's an interest only mortgage and they are making over payments to be able to clear the outstanding at the end of the term.

You DEFINITELY need to clarify this.

"Overpayments" on an interest-only mortgage are not even necessarily possible. If it IS an interest-only, taken out 20 years ago, and they're "overpaying", they are likely to be doing so into an endowment policy. What's its status/value?

Right now, you are staring at a massive can of worms. It is entirely likely that you're working backwards from your preferred outcome, and trying to make the possibilities fit that, instead of working forwards from the current situation and picking the best outcome.

booksurr

questions / facts:
- you do not have savings of your own which you could use to make a lump sum payment (ie gift) towards their mortgage?

- you would need to borrow any money that is used to buy the property from them?

- you do not own a property already as where you live at the moment is rented?

reality check....

1. you would need to secure a mortgage against their house as you have no other security which you could offer a lender

2. you will not live in it yourself so it would be a BTL mortgage

3. your tenants are your parents therefore it will be a Regulated BTL mortgage.

What you want to do is highly praise worthy but likely to be very difficult to do since regulated BTL mortgages are few and far between and come at high cost. You say you can only afford £150 pcm, so even allowing for the fact you are buying at a significant discount (and so meet the 25% deposit requirement for a BTL mortgage), that is about halfway towards an 80k mortgage as the monthly repayment of that is around £300+ (and that is not at regulated BTL rates either)