Children buying parents house

short_butt_sweet

Kim786 wrote: »

If I was unable to keep up with two mortgages I would sell my other home and keep this one as it’s quite sentimental to me having grown up in that house.

where would you live then? in the same house as your parents? would that be practical?

it's nice to want to help your parents with debts, while also letting them stay securely in their home, and you in your home, but can you afford to do all of those things? (i'm not implying the answer is no. it's a genuine question.)

one alternative approach: could you raise enough cash to pay off your father's debts in other ways, including by increasing the mortgage on your own home? and then lend it to your father (so he can use it to pay off his existing debts), securing his debt to you with a mortgage on his house, with interest (if you want to charge any) to be rolled up, so he has nothing to pay you until both your parents have died or they sell the house. (your mother's right to stay in the house, if she outlives your father, should be secured in some way. this might be most simply done by making them joint owners of the house.)

if this were done, the house would remain your parents', as owner-occupiers, so there'd be no issues with CGT, IHT (on a gift with reservation), deprivation of assets, or unusual kinds of mortgages. you'd have to be happy not to see the money you lend them again for many years. and any interest you charge them would be taxable. or if you don't charge any, you'd have to recognize that the same amount in £ will probably be worth much less when you get it back.

if you can't afford that, another approach could be for your parents to take out an equity release mortgage. this would give them a lump sum now (though much less than what they'd get by just selling the property) while preserving their right to live there as long as they live. what this doesn't do is keep the property in the family after they eventually die, because the deal is that it's been sold to a third party (at a discount, which reflects the fact that they won't get possession of the property for many years).

one other general point about helping with debts: will they just fall into debt again afterwards? many people do. or is there a reason why things will be different (at least if there is a solution where your parents end up with a secure, rent-free, mortgage-free home)?

AnotherJoe

Loan your parents the money to pay off the debts. Make it official with a drawn up agreement signed between you and witnessed bya third party.
This way you achieve you aim of freeing them from the debt.
You do not have to pay the 3% extra SDLT nor any legal or other mortgage costs.
Should your parents need to claim benefits, housing or such like, they are not invalidated by living in an rejatives house not paying rent.
It's far far cheaper than equity release.
As per sbs above, the only concern is how did these debts arise and if you do repay them will they go on a spending spree and get back into the same situation?
The money for the loan could either come from your savings, from you paying the debts off each month at the same rate as the mortgage you woudl have taken out, from raising extra on your current mortgage, or a combination of these.
Should a parent need care and the house needs to be sold, your money is protected as you are repaid first.

Lioness_Twinkletoes

Twice you've mentioned that they will be living 'rent free'. It's not though, is it, because they are handing you a £40k gift. That's a lot of rent!

csgohan4

Money and family should never mix


They will forever hold you to the gifted money by the reduced value in price,


where do you think they will get money to repair things?? Boiler, roof? E.t.c? what if they run up more debts, don't look after the place? are you going to evict them, because if you don't you might as well not buy the place and gift them money instead

onwards&upwards

Bad idea.

You aren’t actually helping your parents you would be depriving them of £40k equity and putting them in a much more vulnerable position then they currently are.

If you really want to help them, go and post their situation on the debt free wannabe section of the forum and the good folk there will help you work out the best way for them to tackle the debt.

ognum

There are a lot of things that could go wrong, you need to think about this carefully.

You will be their LL (even if they don’t pay rent) you therefore would have all the responsibilities of a LL, gas safety checks annually, repairs, updates, allother safety issues. Read up on the legal of being a LL.

Their home will belong to you, are you married? If not when you get married (if ever) their home will also belong to your partner and if you divorce part of it will belong to the,

Think about the effect on future claims for government support, pensions, social security payments.

When they die and you want to sell you will have a capital gains tax bill to pay.

How will this affect your relationship with your siblings. A friend bought their parents council house and the parents lived there. On the parents deathother family members were insenced that they would get no part in the profit the house made. They now don’t speak!

Can you afford the upkeep of two houses inthe long term?

Could you simply make your father a legal loan to pay off his debts and take the money from his estate in the future on his death?

Keep_pedalling

Kim786 wrote: »

Hardly a cunning scheme.

Also my parents do not earn enough to remortgage or get a loan of that amount. And they would rather sell to a member of the family to keep the house in the family and have more sense of security to stay living in the house if it’s owned by a family member rather than a stranger.

They would actually be more secure using a stranger via equity release. What happens to them if you run into financial difficulty though illness, redundancy or divorce? What happens to them if you pre decease them?

Someone mentioned above that deliberate deprivation of assets cannot apply after 7 years, that is not true, there is no time limit. This sort of arrangement has no other real explanation, there are no tax benefits to either party and for you only negative implications as regards potential CGT in the future.

AnotherJoe

Keep_pedalling wrote: »

They would actually be more secure using a stranger via equity release. What happens to them if you run into financial difficulty though illness, redundancy or divorce? What happens to them if you pre decease them?

Someone mentioned above that deliberate deprivation of assets cannot apply after 7 years, that is not true, there is no time limit. This sort of arrangement has no other real explanation, there are no tax benefits to either party and for you only negative implications as regards potential CGT in the future.

A personal loan from the OP witha condition that it does not need to be redeeemd until both parents die, will take care of that.

Keep_pedalling

AnotherJoe wrote: »

A personal loan from the OP witha condition that it does not need to be redeeemd until both parents die, will take care of that.

A loan would be a reasonable option if the OP had the spare cash, but they need a mortgage to buy so don’t have the resources to make a loan without taking on a pile of unsecured debt.

Mojisola

Kim786 wrote: »

I also currently have a residential mortgage at the moment and I would be looking to do a second mortgage on the property. I can definitely afford to pay both mortgages, that isn’t a problem.

Keep_pedalling wrote: »

A loan would be a reasonable option if the OP had the spare cash, but they need a mortgage to buy so don’t have the resources to make a loan without taking on a pile of unsecured debt.

If Kim can afford to pay a second mortgage, that money could go towards repaying the debts directly.

It would also be worth the parents sorting out their finances with the help of one of debt charities.