Advice needed - shared ownership with parents

Ltaylor118

So basically my parents want to release some equity from their house so they dont have to work as many hours and me and my partner are renting and saving to get on the property ladder.
So my parents suggested that we buy one bigger house together to help us get on the property ladder and so they will no longer have a mortgage to pay and this way will give them some money to live off.
So potentially they will put half their money down and we will get a mortgage for the other half on a larger property?
Alternatively we buy half the house they currently live in if that is possible?

Has anyone heard of this or done this?

Thanks just unsure where to start

Lilla_D

Let me just reply to your questions first and then address the the usual concerns about mixing family and money.

- If your parents sell their property and give you £x, they can 1) either give it as a gift, i.e. they wouldn't be on the mortgage or the deeds or 2) they give it and be on the mortgage and the deeds.
- The first option means that their age is not going to restrict the mortgage term and the potential borrowing and you won't have to discount lenders who only accept max 2 applicants. On the other hand, they would also be without a house they own, unless you go with one of the few lenders who accept gifts with strings attached, e.g. an interest noted on the deeds. And as per an earlier discussion, there is also a lender who'd allow them to be on the deed, even if they are not on the mortgage.
- The second option means that they'll still have a house to their name, but their age will restrict the mortgage term and therefore the potential borrowing as well as having to choose from lenders who accept more than 2 applicants.
- If you do buy together, then you don't get a mortgage for half the property, but you get a mortgage for the whole property. The shared ownership concept doesn't work in your proposed private setting.
- When more than 1 person is named on the deed, then the solicitor will check who will own what percentage. The lender is not interested in this split. As far as they are concerned, all people named on the mortgage are responsible for the mortgage payments.
- If you buy a share in your parents' current property, then it's a whole different ballgame. Will you move in? If not, then you've just got yourself a resi mortgage, so if you did want to buy a property for yourself to live in as well, then your potential borrowing will be seriously reduced (if possible at all based on your incomes and outgoings) and you'll be liable to paying the extra stamp duty.

Where to start then? I'd recommend sitting down with your partner and your parents and really talking through your plans and intentions and where you want to be in 5 years' time etc. You may also want to talk to a broker to discuss the mortgage options as well as to a solicitor to discuss legal implications (ownership, trusts, stamp duty...) and think about inheritance and what if one party dies or wants out (relations can break down).

If your parents just want some cash, can they remortgage without involving you or can they downsize to release some of the equity? And there is of course the equity release option for those over 55, which I don't deal with, but they may decide to explore that as well.

Ltaylor118

Thanks for your reply. Very insightful.

If we bought a share in my parents current house we would move in. Would the options then be the same as the 2 you discussed?

My parents are wanting to get a mobile home down near the sea to live in for most of the year but still want a home to come back to (when the weather gets very cold) which is why we were considering buying a share of their house or buying a larger house with them. So with their half put in and our deposit we would only be borrowing the same if not less on a mortgage as if we were buying a smaller house as a couple.
They do not want to be on the mortgage but they do want to be on the deeds so the share of money the put in they will get back (they are not gifting it to us)

The equity release option is not an option as they are not even 50 yet.

Thanks its all very confusing for a novice

Jenniefour

So this is essentially about your parents wanting to take early partial retirement and they appear not to be in a position to finance it by themselves. Or they are just trying to help out yourself and your partner and they can afford their plan. Coincidentally, your partner and yourself want to get on the property ladder, and your parents have put forwards a proposal that appears to meet everyone's needs. In the short term it might well do that. However, the longer term is a whole different ball game, especially since you and your partner will have tied your fortunes to your parents (and vice versa) in a major way.

I suggest you act on Lilla D's advice to go and sit down with a solicitor and get them to explain properly the potential implications and downsides to mixing family and money/property in this way. I would recommend you do this first. Even families who get on very well with each other can, and do, come seriously unstuck on big life changing plans like these - some of which might not have been anticipated/foreseen/intended as a possibility. For example, what would happen if your own relationships ends?

Your parents might also want to research the realities of buying a mobile home, if they haven't already. For instance, mobile homes steadily go down in value, costs and conditions by park owner etc.

What happens when your parents do want their money back? Do you and your partner earn enough so that you can buy out your parents at some point?

You need to start putting some possible/potential realities to this plan in the longer term before agreeing/acting on it so you are making an independent informed decision and properly protecting your own interests. Your parents might want to consider taking professional advice on retirement planning to get some input on how to get to earlier retirement without involving their children in plans that could cause future serious problems.