Need advice to help out my parents

irishred

Hi there
My parents (68 and 77) currently live mortgage free in the north but as they get older, I want to move them to London to be closer to me, my sister and their grandchildren.
In order to maintain their living standards, we would need to spend more on an equivalent home in London. My sister and I want to support them to do this somehow.
The question is how to achieve this in the most practical and tax efficient manner. We would need to borrow the additional money but I don't know whether my parents would be able to get a mortgage with decent terms given their age. If they can't, we (my sister and I) could easily borrow the money but this would require them to sell their home and give/gift the proceeds to us so we could put it down as equity against the new one. What would the inheritance tax implications be for this? This would also mean we had higher stamp duty on the new property etc as we both already own our homes.
We would probably be looking at borrowing about 30% of the value of the new property so should be attractive to any lender.
Any tips or advice on the best way forward or recommendations on someone I could speak to would be greatly appreciated.
Thanks

xylophone

Assuming that you and your sister have access to sufficient cash, you could lend your parents the money to use with the proceeds of the sale of their existing home to buy a property outright near you.

You and your sister would take a first charge on your parents' property such that on sale your loan would be repaid.


The loan could be interest free/monthly interest paying (you would need to advise HMRC) or interest rolled up - be aware that the eventual income tax bill could be high.

Tealblue

irishred wrote: »

My parents (68 and 77) currently live mortgage free in the north but as they get older, I want to move them to London to be closer to me, my sister and their grandchildren.

Any tips or advice on the best way forward or recommendations on someone I could speak to would be greatly appreciated.

You want to move them...but do they want to be moved, when all their friends and contacts are based where they have made their lives?

I'd start by speaking to them. If they are wholeheartedly in favour of moving and adopting a very different lifestyle, your next port of call would be a solicitor (make sure they are a STEP member).

irishred

Thanks for the replies.

Assuming that you and your sister have access to sufficient cash, you could lend your parents the money to use with the proceeds of the sale of their existing home to buy a property outright near you.

We don't have access to the additional cash required. We would need to borrow it against the value of the property we buy and we would cover the repayments.

You want to move them...but do they want to be moved, when all their friends and contacts are based where they have made their lives?

I'd start by speaking to them. If they are wholeheartedly in favour of moving and adopting a very different lifestyle, your next port of call would be a solicitor (make sure they are a STEP member).

I should have said, we aren't doing this without their full agreement. They also want to be closer to us but can't work out how to do it financially without living too far outside of London or downsizing considerably. We want them to move here only if we can maintain their standard of living by buying a property in a similar location and a similar size hence the additional cash required.

Kynthia

If you want to avoid owning all or part of their property, then loaning you parents the money to buy without a mortgage could be the easiest way. It also avoids any suspicion of deprivation of assets should they ever require funded care.

If you don't have the cash you could perhaps remortgage your existing properties to raise the cash. However if you want to charge your parents interest on the loan due to paying mortgage interest yourself, it gets more complicated.

Perhaps speak to an experienced mortgage broker about your parents mortgage options and whether it's possible for you to be a guarantor without being an owner. Or you may decide being a part-owner with a trust deed specifying percentages is best despite the additional stamp duty, as your share will grow in value if property prices increase. While you may then be liable for capital gains tax, that's only if you have a gain.

TBagpuss

I agree with Teal Blue - check first whether your parnets want to move.

ifthey do, then you could consider the following options:

1. They sell their current home, and rent in London, using their capital to pay rent.

2. You and your sister both remortgage your own owns to raise extra funds, use that money together with the funds from your parents home to buy a new property closer to you. The new property is held in your parents names and you ad your sister have secured loans against it in relation to the funds you have each loaned them.

3. You and your sister buy a new property in London, with a mortgage. your parents give you funds from the sale of their home as a deposit.

4. Your parents decide to move closer to you but accept that this will mean downsizing / reducing their standard of living in orderto be able to afford a house/flat.

5. Your paretns take advice and look into whether they can afford to buy a property closer to you with an equity release mortgage to make u the difference between their capital and the cost of a new home.

The options will depend on what the numbers are and what your parents priorities are.

Your parents could also consider whether they want to move somewhere bit closer, but still outside London, which might make a move more affordable. Or they might decide that they would rather remain where they are and, if necessary, make plans about how to fund any additional help or care they may need as they get older. They might decide that they would rather use their savings to pay for help such as a cleaner, gardener etc rather than depend on you and your sister.

Another option of course might be for you and/or your sister to think about whether you could move the other way - if you won properties then you may find that moving would be very affordable, and allow you to take a drop in income and maintain a similar lifestyle, depending on what type of jobs you and any spouses.partners have.

xylophone

You and your sister could remortgage your own homes to raise the cash and lend it to your parents against a charge on their new property as above?

They could repay capital on a monthly basis and you and your sister could use this to pay the extra payments on your own homes?

atush

You or your sister could sell up and buy a new place with a seperate dwelling/flat for your parents attached.

They could give you the money to do so from t he sale of their house?


Otherwise a loan as described above is your best bet.

Linton

You parents should be very careful about any scheme that involves them giving you their money. Apart from possible difficulties with future benefits or care needs they need to retain their own money to give them freedom of action in the future, for example if anything should happen to you or your sister.


So I would agree with the idea of a loan charged against the house.

LHW99

There are now retirement interest only mortgages

https://www.telegraph.co.uk/equity-release/mortgages/lifetime-mortgage-retirement-interest-only-right/
Which if they have sufficient income to cover the interest plus living expenses could be an option. They would probably need to see a broker.

LeadFarmer

If your parents sell their house and give the money to you to use as a deposit on another house that you will be taking a mortgage out for, then the 7yr inheritance tax rule would apply if they are over the inheritance tax threshold. If they die within 7yrs then inheritance tax would have to be paid on that money.