Parent takes out mortgage 4 child. Wise move?

skunkman

I want to buy a flat in Glasgow. However i'm unlikely to get a mortgage outright as i'm studying for a part-time PhD, and therefore not earning a lot. My father, who has savings, is willing to put up a 10% deposit and take the mortgage out in his name (he currently rents and does not own any other property). The plan is I will pay the monthly mortgage fee, get to live in the house, and then inherit the house when he passes away (I will additionally inherit a sum over and above the total of the mortgage, so this could be paid off in full at the moment of inheritance). ;):cool:

My questions are these:

- what problems - from inheritance issues to capital gains tax - might this set up run into?

- are there any other, better, alternative ways around this?

- are there any specific considerations given the relatively low cost of the property (96k)

Kind Regards... :beer::j:rotfl:

glosoli

I suppose the first question is, is your fathers income sufficient to be able to afford both his existing rented property, and be able to pass affordability for the £86,400 mortgage also?

How old is he at the moment, and what is his income like?

Furthermore, if you will be paying him rent on a monthly basis (i.e you paying the mortgage payment), then it may be considered a regulated buy to let mortgage, which means he will need a bigger deposit than 10% to put down. Also, if it is classified as a buy to let mortgage, the problem may be that he is not a home owner at the moment, which will narrow down the list of potential lenders.

csgohan4

money and family shouldn't mix. If you can't afford a mortgage on your own now, why not wait, buying a house has responsibilities and involving your parents to the extent of them buying one with a mortgage sounds like a bad idea.

davidmcn

Some issues to think about:

• BTL lenders don't always like family members as tenants
• are you happy paying money in exchange for just the hope that one day you'll inherit it?
• you're likely to want to move house before you inherit - what happens then? Or if you decide to stay there but "buy out" your dad?
• if dad ever buys another property then he'd need to pay the additional rate of LBTT for second homes
• you're at risk of whatever happens to your dad's finances (bankruptcy, divorce etc)
• Dad would be liable for capital gains tax if he sells (property would be exempt if it is in your name and your main residence)
• you might not inherit it! In Scotland, for the meantime, all children and any spouse have a claim in the estate (irrespective of what any Will says), or Dad might change his mind, or there might be debts needing paid off.

Might be simpler if you can get a mortgage in your own name with your dad as guarantor.

buglawton

Anyone buying properties for relatives needs to be aware of the new tax snafus. There was an article in the Telegraph yesterday where 4 children had bought and shared ownership of a house for their elderly mother. Now it's been discovered that if any of the 4 children buy their first or only property to live in themselves, they are liable for the 3% BTL supertax on top of the usual stamp duty.

I guess that acting as the mortgage guarantor is the only way to go.

skunkman

Hello

He currently has around 750k in savings from recent family house sale. One thing i'm now considering is whether he might buy the house outright and pass it as a gift to my brother and i (a 50/50 split).

This would appear to make sense because:

a) No worries about Mortgage
b) this would boost his IHT exemption up by another 100k

Does that make sense to you?

TNX

skunkman

Hello

Do you know is a parental guarantor with significant assets (750k) makes it easy for me to get the mortgage? I have just quite my full time job (good timing) and will be working freelance for the next few years you see.

Also, there might be the option to buy the house outright and place it in my brother and I's name. Does that make sense? Seems a good way to add to the IHT non-deductible portion of my fathers estate (what with Osborne's increasing surplus for real estate assets).

Does that make sense to you?

TNX