Helping retired parents

kafmc

Is it possible to purchase 50% of my parents house for the following reasons:
a) To release cash for them as they are mortgage free but cash poor
b) it will be an investment for me in the long run

I would need a repayment mortgage to cover my 50% which I could achieve on my salary as there house is valued at £165k.

I assume I have to be added to the deeds which they are fine with.

Any advice on how to do this or any tax/legal implications would be great.

Thanks

Slithery

Are you going to be living there?

kafmc

No I have my own property, just my parents will live there

00ec25

realistically? next to impossible

the lender would require your parents to be party to the mortgage since they will be a) part owners and b) still living there making it impossible to repossess if you defaulted, unless the parents are also "exposed" to the mortgage, and it sounds like your parents would not meet the mortgage affordability requirements given they are retired and apparently on low incomes

kafmc

Thanks, would it not be possible for all 3 to be on the mortgage but my income covering the mortgage affordability?

getmore4less

if they don't need all the cash up front they could sell you half the house and be the lender.

You just pay them in instalments

don't forget the SDLT.

G_M

Some things to consider:

1) where do you live now? Do you already own? If so, this would be a 2nd property and subject to aditional SDLT

2) where do you plan to live? If not with your parents, then you'd be liable to Capital Gains Tax if/when you sell.

3) Would you pay market value?
* If not, 'Deprivation of Assets' may become relevant if they need a care home in the future.
* If yes, you'd be wise to pay for a written valuation (RICS surveyor) (edit: mortgage valuation would do)

4) As the property would be jointly owned by you and your parents, most mortage lenders would require all 3 of you to be on be mortgage agreement. How old are they? Would they qualify? Speak to an independant mortgage broker

5) do you have siblings?
* Is it likely to be your parents intention for you to inherit their Estate (including the property) on their deaths?
* If they are likely to want to bequeath equal or significant amounts of their Estate to others, the property might need to be sold.
* there might be difficulties if eg you refused to sell your 50% and the Executers could therefore not sell your parents' 50%

6) How would you own?
* most couples (probably your parents) own as 'Joint Tenants'. Thus they each own 100% jointl and if one dies the other continues to own 100%
* most non-couples own as 'Tenant In Common'. Thus they each own a set % of the property. If one dies, their % is passed to whoever they name in their will. You'd need a Deed drawn up. Also See

https://www.gov.uk/joint-property-ownership

kafmc

wow a lot to consider thanks for such a comprehensive response.

I have my own house and mortgage but can afford a lot more than my current mortgage. SDLT calcs approx. £6k if I have used the online calculator correctly!
Yes I would pay for a formal valuation as would reduce headache in the future.

I have 2 brothers who would get a 3rd of my parents estate upon both deaths, my brothers are happy that this would now be a 3rd of my parents 50% and happy to agree formally.

It seems more complicated than I anticipated so will get some advice, I assume I need a mortgage broker and a solicitor to provide my options?

This is my first ever post, I read but have never posted. Thanks so much for taking the time to help me.

Cakeguts

kafmc wrote: »

Is it possible to purchase 50% of my parents house for the following reasons:
a) To release cash for them as they are mortgage free but cash poor
b) it will be an investment for me in the long run

I would need a repayment mortgage to cover my 50% which I could achieve on my salary as there house is valued at £165k.

I assume I have to be added to the deeds which they are fine with.

Any advice on how to do this or any tax/legal implications would be great.

Thanks

Simplest solutions are these. Your parents sell their house and buy a retirement flat. Retirement flats tend to be a lot cheaper because of the lower age limits.

Depending on the council your parents might be able to get a social housing rented flat. So they sell the house move into the social housing and pay the rent out of the money from selling the house. I have a friend who lives in sheltered social housing and someone in that block sold a house and got a place in there so I know it is possible to do but it will depend on what the council has available.

Moving to sheltered housing of some sort would be the best option to free up some cash.

kafmc

Thanks no retirement properties in our area and social housing impossible in our area if they had savings of that level.

Cakeguts

kafmc wrote: »

Thanks no retirement properties in our area and social housing impossible in our area if they had savings of that level.

So you are saying that your parents already live in the cheapest housing solution for a couple in your area?