Please help..

wakeup16

Hi there
My sister and I have been asked by our parents, in order for them to afford to remain in their house in retirement, to consider buying their house on an interest only mortgage and them paying us a rental income to cover the mortgage payments. The information currently is fairly vague - myself and my sister have mortgages of our own with spouses and wouldn't be in a position to have a deposit for the house - in addition our income is fairly minimal - ... Can you let me know if this idea is common, if we are able to do it without a deposit and please let me know any pitfalls - as to me it sounds a little dubious.... and perhaps not the best route forward..... They basically need money for their retirement.

Thanks

jonewer

It sounds a bit sketchy...

Your parents will be paying all the money back to the bank in any case - through the rent - to cover the IO payments. Its hard to see how this is going to fund their retirement. Plus they may end up homeless if they run out of money - either that or you and your sister will end up funding their retirement.

Meanwhile you and your sister take on a massive amount of debt on a house on which you will not be gaining any equity on through capital repayments.

Its sounds a bit like an "ought for nought" scheme to me.

Poppy9

Are your parents wanting to do this because they qualify for Housing Benefit which would pay the rent. If so, someone better informed than me will come along as I don't think HB rules allow you to do this.

Also if it is with the intention of qualifying for HB then the capital they get from the sale of the house will be taken into account.

wisbech_lad

Unlikely to be able to work, as you say your incomes are minimal, plus you already have mortgages.

BTL mortgages need, ISTR, minimum 15% deposit. Then you need the rental to cover the IO payment at least – which is unlikely at today’s prices.

I am guessing that your parents haven’t been able to pay off the mortgage before retirement, so see passing the mortgage on to you a way of continuing to have a mortgage by proxy after retirement? Or is it as a "DIY" equity withdrawal?

Pitfalls - well, apart from the HB thing above, what happens if you (or your sister) have a real need for money in the future and look to sell your half of the house? Or if one of you gets divorced, and the court orders the assets to be split? Who will pay to have the boiler fixed?

poppy10_2

How much of the mortgage have they paid off?

wakeup16

Hi there

Thanks for all responses.... it's helping..
In answer to the 'how much do parents have to pay off of existing mortgage' - it will be have been paid off - just!... So from their point of view it is releasing equity from their house sale to us to give them money to live on?

wakeup16

Hi there
mmmm I think it is 'diy equity withdrawal'.... any thoughts?