Can we jointly buy a house with a parent? Help with Mortgage!

Flurgie55

I'll try and explain the situation... My husband and I have a house that is owned by just the two of us. We had the deposit and my dad lent us the money we needed so is our 'mortgagee'. We pay into an account each month (our own accounts) the amount specified by him. We want to buy a bigger house and are trying to figure out how to do this. We can't borrow any money in our current situation as we 'owe' £150000 and are obliged to pay £600 a month. My dad has suggested that we sell our house, give him back the £150,000, and he buys a share in the new house for the £150000.

We're hoping to get £270,000 for our house and the one we want to buy is £380,000. So if he puts in £150,000, and we put in what we have, we'll need to borrow around £80,000.

One alternative is we keep the debt but he waives the repayments (not sure this would work as we'd still have the huge 'debt') and the other is to 'give' us the £150,000 now (which he doesn't want to do as needs to be fair to other siblings). Having never had a typical mortgage, we're not sure where to start especially as it's a non-typical situation. My dad said he intends to then sign over his share of the house to us (in a year or two), effectively giving us the £150,000. Inheritance tax is also a potential factor in this as he is in his 80's.

Can anyone advise if this is even a feasible thing to do? And offer any suggestions that might work better? Also an idea of how to approach a mortgage lender?

TIA

G_M

You are unlikely to get a joint mortgage with your father if he is in his 80s.

And if you did buy jointly with him, you'd (presumably) be hit with the extra 3% SDLT as I'm guessing he also owns his own property- so this would be his 2nd.

If he 'gifts' you the £150K, it would remain in his Estate for 7 years in the event of his death.

If you continue to owe it to him as a loan, you will owe it to his Estate whn he dies - how would you pay that? Or would you be inheriting enough other assets from his will to write off that debt?

What other assets does he have? What if he needs to go into care - has he enough to cover those (expensive) costs?

Without knowing the full financial situation, including number of other siblings (assuming he plans to leave his estate to them all equally!), income, investments, current and potential needs, it is hard to advise. But these two statements seem to contradict each other:

...the other is to 'give' us the £150,000 now (which he doesn't want to do as needs to be fair to other siblings).......
.....he intends to then sign over his share of the house to us (in a year or two), effectively giving us the £150,000.

I'd suggest he see a good wills and probate solicitor who also does finacial and estate planning.


You have about £120K in equity in your current property (after paying him back). You need £260K more for your new property. Either you get it from him, or from a traditional mortgage (which you seem to indicate is not possible).

Flurgie55

Thanks so much for the helpful reply. We have £120 equity in the house, and about £50,000 in savings between us. Getting a mortgage for the rest in pretty sure won't be possible as our income isn't very much and especially the last 1-2yrs years as my husband had encephalitis, was hospitalised and was unable to work for some time.

Please could you shed some light on the joint mortgage situation? I've tried googling but to no avail. If my dad were to put £150000 in, are we (the two of us) not able to get a mortgage for the amount that's left that's nothing to do with him? Or is it that because he's joint owner that if we defaulted on the mortgage the house would have to be sold to pay the debt? Sorry for the complete ignorance on the subject.

There are 2 siblings so it's split between the three of us. They are both 20yrs older than me so the £150,000 is for me but they got their share later in life than I am now which is why he doesn't want to 'gift' us the money yet. Its just all made more difficult due to his age.

What would you say is the best way to be able to buy the house knowing the current situation. There was also talk of giving us the money with a condition that we have to pay into savings a certain amount every month. Essentially he is trying to help us but wants to ensure we're not getting a free ride and wants to be fair to siblings.

AnotherJoe

You could do what I've done with a daughter. I have given her a loan, witha charge against the house to secure it. The terms of the loan are that it doesn't need to be repaid until the house is sold. The advantage is that as I am not an owner there's no extra 3% SDLT and she gets a better mortgage rate as the LTV is very good.
Downside is that not many lenders are up for this. She has so far mortage with santandera Nd then remortgaged with Nationwide so those are OK or at least were.
My will deals witH what happens when I snuff it in terms of equalising bequests to other siblings to take account of the loan when it gets wrapped upon my death. (Essentially they get an equivalent share out of my estate first, she gets the loan written off then everyone gets an equal share of what's left.

xylophone

Have your siblings already been gifted £150,000 each by your father?

You currently have a loan from your father and are paying £600 a month (repayment of capital) into one of his bank accounts?

Is he in a position to lend you another £80,000?

You increase your repayments of capital?

Your father's will specifies that on his death, a certain proportion of the outstanding loan should be forgiven but the balance remains a loan asset which is transferred (half each) to your siblings and you repay them until the debt is satisfied in full?

G_M

Flurgie55 wrote: »

Please could you shed some light on the joint mortgage situation? I've tried googling but to no avail. If my dad were to put £150000 in, are we (the two of us) not able to get a mortgage for the amount that's left that's nothing to do with him? Or is it that because he's joint owner that if we defaulted on the mortgage the house would have to be sold to pay the debt? Sorry for the complete ignorance on the subject.

It depends :

* "If my dad were to put £150000 in" suggests he is becoming a joint owner. He would therefore also need to be a joint mortgage applicant (v hard at his age).


* if the £150K is a gift or loan to you, then you & hubby become sole owners without dad, and you 2 can then apply fora mortgage in your names (without dad). But as AnotherJoe says above, some lenders don't like applicants who receive large loans (wary that repayments will be hard).


An independant mortgage broker could advise on that.