Buying House from Parents - Concessionary Purchase of Transfer of Equity?

AdrianC

Under_the_Radar wrote: »

13 years actually. It wasn't ignored.

OK, so it was a 14yr mortgage when it was taken out. Unusual, but there we go.

Given that it was interest-only, rather than repayment, what's the current value of whatever investment product (often referred to as an endowment, back in the day) taken out alongside it? I'm presuming that she's not been receiving red letters to show a substantial forecast shortfall?

sparky130a

glentoran99 wrote: »

Its in the opening post


"She doesn't want to move if she doesn't have to "

I don't want a 1 bedroom flat. But i have.

When you are sat on a £650K asset you have options.

teddysmum

AdrianC wrote: »

£187k is ~30% of £650k. You take out a ~£187k mortgage, and become a tenant-in-common with a ~30% share of ownership. That borrowed money goes to repay the existing mortgage.

Your mother retains ownership of the other 70%, and she has not deprived herself of any of her assets. Should she need residential care, a charge can be placed against her share while your father is still in residence. That charge would later need to be satisfied, and the money that's been "borrowed" from the council to pay for her care repaid, when your father no longer lives in the property - which may mean you need to sell it. (I think the same would apply if it was your father needing residential care, assuming they're married, but somebody else may be able to confirm that.)

If your mother leaves her 70% to you, rather than your father, then her estate may be liable for IHT.

Can you get a £187k mortgage in your own right, with or without your partner?

I believe that whichever parent needs care first would not have the house (just other capital) taken into account for are purposes, so no charge on the house, but it would apply when there is one parent left and they need are.


I was wondering about this situation, should I need care as our house is in my name . Someone on here, who is knowledgeable, said that ours would be treated as joint owned and the Age UK site backs this up. ie the house which is home (as opposed to extra properties) only counts as an asset for the remaining one of a married couple.

Under_the_Radar_2

AdrianC wrote: »

OK, so it was a 14yr mortgage when it was taken out. Unusual, but there we go.

Given that it was interest-only, rather than repayment, what's the current value of whatever investment product (often referred to as an endowment, back in the day) taken out alongside it? I'm presuming that she's not been receiving red letters to show a substantial forecast shortfall?

I have no idea to be honest. I'm sure it would be with the relevant paperwork at home. If there were letters arriving though, I would know about it that, so no she hasn't received any. Receive an annual letter reminding us of the deadline, but we have told them I will either be buying it, or we will be selling up, as they can't help us with a remortgage.

teddysmum wrote: »

I believe that whichever parent needs care first would not have the house (just other capital) taken into account for are purposes, so no charge on the house, but it would apply when there is one parent left and they need are.


I was wondering about this situation, should I need care as our house is in my name . Someone on here, who is knowledgeable, said that ours would be treated as joint owned and the Age UK site backs this up. ie the house which is home (as opposed to extra properties) only counts as an asset for the remaining one of a married couple.

Not something I know about I'm afraid, although if it has been backed up on here and by Age UK, then it sounds relatively reasonable. Perhaps speak to someone face to face though if you're concerned about it.

AdrianC

Under_the_Radar wrote: »

I have no idea to be honest. I'm sure it would be with the relevant paperwork at home. If there were letters arriving though, I would know about it that, so no she hasn't received any.

Let's go back in time a bit.

Back in the '90s, when these were popular, you signed up for two financial products.
1. You borrowed money. Every month you paid the interest. At the end of the term, you owed the entire value.
2. You started a savings product. Every month you paid money in. At the end of the term, if the growth predictions had been met, it paid your mortgage off. If the growth had been exceeded, you got a nice windfall. If, though, the predicted growth hadn't been achieved, you owed money.

Everybody expected the first of those three scenarios to be a sure thing. Everybody bought in with the expectation the second would happen. The reality was that the third was by far the most common. Which is why they fell out of favour.

But sometimes, people didn't bother with that second policy. I strongly suspect that included your mother. There is no second product. If there was, it would be repaying a good chunk of that £187k mortgage. Even if it was only going to half-cover, you'd be laughing, right? You'd only have £93,500 to find instead of £187,000.

Has she JUST been paying mortgage interest, or has there been money going out every month to some other product, too...?

martindow

Assuming there is no savings policy that will pay off the bulk or all of the mortgage, your parents are in the fortunate position of having enough equity to be able to buy another house outright.

I'm sure they would prefer not to move, but they do have a way out of this situation. Had house prices not inflated so much they could have been in a much more difficult position.

teddysmum

Under_the_Radar wrote: »

Not something I know about I'm afraid, although if it has been backed up on here and by Age UK, then it sounds relatively reasonable. Perhaps speak to someone face to face though if you're concerned about it.

I'm not worried, but commented as Adrian C gave misinformation, regarding how a home is considered for care cost purposes.

Under_the_Radar_2

AdrianC wrote: »

Let's go back in time a bit.

Back in the '90s, when these were popular, you signed up for two financial products.
1. You borrowed money. Every month you paid the interest. At the end of the term, you owed the entire value.
2. You started a savings product. Every month you paid money in. At the end of the term, if the growth predictions had been met, it paid your mortgage off. If the growth had been exceeded, you got a nice windfall. If, though, the predicted growth hadn't been achieved, you owed money.

Everybody expected the first of those three scenarios to be a sure thing. Everybody bought in with the expectation the second would happen. The reality was that the third was by far the most common. Which is why they fell out of favour.

But sometimes, people didn't bother with that second policy. I strongly suspect that included your mother. There is no second product. If there was, it would be repaying a good chunk of that £187k mortgage. Even if it was only going to half-cover, you'd be laughing, right? You'd only have £93,500 to find instead of £187,000.

Has she JUST been paying mortgage interest, or has there been money going out every month to some other product, too...?

Nope they have just been paying the interest. A shame, your scenario would've been lovely.

martindow wrote: »

Assuming there is no savings policy that will pay off the bulk or all of the mortgage, your parents are in the fortunate position of having enough equity to be able to buy another house outright.

I'm sure they would prefer not to move, but they do have a way out of this situation. Had house prices not inflated so much they could have been in a much more difficult position.

Oh for sure, we are very lucky that house prices have gone up and not down, and yes I agree we do have the option of downsizing, forgive me if this post has in anyway sounded like we are not in a fortunate position, there are plenty of options, but as the 4 of us residing in there would all like to stay there, and from my point of view buying a property for about a third of its actual value is probably the best shot I've got at getting on the property ladder, considering me and my partner will be surviving on one income for the foreseeable future, my number one option will be to stay there, I was just hoping someone on here may have had some experience in either of my original scenarios and was able to advise as to any complications that may arise that I may not have thought of. Thanks