Buying fathers house under market value

Cookiejofin

Complicated one for me so needing advice. My dad and step Mum will have to sell by November this year or lose their house. My dad is very ill and doesn’t want to move and step Mum doesn’t either but will be in their 70s by then with £185000 mortgage, hence will lose house. It has an annex attached to the house which my grandparents lived in when I was a kid. So we’re hoping that I can buy the house leaving myself mortgage free as I wouldn’t be able to get a mortgage as small business owner and just adopted a baby so no banks would give me a mortgage ( have checked all this)
So if I sold my house could buy theirs but under market value by probably 100000. I would then live in the house and they would live rent free for rest of their lives in the annex. Can anyone tell me if that would get any of us in trouble in the future. It just seems the best move for me to look after all my family together and them help with childcare lol thanks :p:smiley

kingstreet

Foreseeable need for state-funded social care would be the main worry.

My dad is very ill and doesn't want to move

Your plan would see them deprive themselves of a sizeable amount of money which could have been used to fund their care needs and that includes homecare, or in a residential or nursing setting.

If his needs are unpredictable/unstable there may be a case for an application for fully-funded NHS continuing care.

Please search for "deprivation of assets/capital" for more information.

agrinnall

There's nothing to stop you doing it, but there is the potential that if your parents require funding for care in the future they will fall foul of the deprivation of assets rules.

Cross posted with kingstreet, great minds and all that...

Sea_Shell

What's the market value of the house?

xylophone

Are you saying that your parents owe the mortgagee £185,000?

How much is the house worth on the open market?

How much money will you realise from the sale of your house?

Let's say that their house is worth £320,000 and after you have sold your house you will have £220,000.

You pay £220,000 for the property and they take a first charge on the property against your debt of £100,000.

You set up a formal legal agreement to repay the £100,000 by regular monthly instalments over 10/15 years.

Such an arrangement gives your parents some capital and a regular monthly income which they can invest/save.

Should care be needed in the future, their pension income, plus your repayments plus their capital should enable them to pay for carers to come to the annexe which presumably is adapted for elderly living.

If you were in the situation that you had to sell the property, obviously you would have to repay your parents and they would have to find rented accommodation.

As both are over 70 and one is seriously ill, it may be that the LA would be prepared to offer some form of sheltered accommodation in this event.

theartfullodger

Hopefully stamp duty etc assessed at actual market value: HMRC aren't 3-yr old twits...

kingstreet

theartfullodger wrote: »

Hopefully stamp duty etc assessed at actual market value: HMRC aren't 3-yr old twits...

Consideration, not market value.

You getting mixed up with CGT, on such cases?

Cakeguts

Why would someone who has had the whole house to live in agree to just live in the annex. I can see a whole range of problems with your parents expecting you to live in the annex and they carry on living in THEIR house.

getmore4less

If you can raise the cash to pay off the mortgage just buy that bit(or a bit less and they get to keep some cash)

They continue to own the rest.

NO deprivation of assets as they have kept all of those.

NO gift with reservation they only sold a bit of the house that was in debt.

Given the numbers probably no IHT implications going forward for them

more details needed but the basic idea is probably sound just needs some tuning to make it work.

Margot123

Can you not get a self-certificated mortgage? Many self-employed people I know have one.
You would pay a higher rate but you will find a lender, and most don't even want to see accounts.

What you are suggesting though would be deemed a deprivation of assets should the older folk need full-time residential care. The Govt is very wise to this.

xylophone

What you are suggesting though would be deemed a deprivation of assets should the older folk need full-time residential care.

They would be receiving full market value for their property under the plan outlined in post 5 above.

How can this be regarded as deprivation?

The OP would not be paying interest on the "loan/payment by instalments" but as the parents would be living in his house rent (and possibly utilities etc) free, they could hardly complain?

They would have the security of a first charge on the property should it have to be sold.

They could afford to buy in care in the annexe if needed.

They would have capital/savings/pension/loan repayments to put towards residential care should it be needed?