Buying parent's house through my LTD company

username901

My parents own their home, worth approx £250k. Both pensioners, Dad is in poor health, end stage heart failure so probably <12 months. They're asset rich and cash poor and have been looking in to equity release, which although I've not read up much on, does seem an expensive way of borrowing (for them). They're hoping to release £50k or so, and then when Dad dies he wants mum to sell up, move nearer me and split the house 3 ways for our inheritance (brother), which is very kind of them but I imagine they'll run in to issues if mum has to go in to care (although she had cancer some 7 years ago, she's in pretty good health otherwise). They don't want to sell up now, fair enough given dads health.

I just wanted to explore other options. They're quite proud people so I don't think they would want me to give them money each month, they'd rather I stick it in my kids savings. At the moment wife and I are drawing up to end of our 20% tax band so future dividends would be 37.5% taxed.

My LTD company is for consulting, main contract is a stable long term agreement, am just coming up to 1 years business. From some fairly quick reading I may need to setup an SPV for this kind of venture to keep it separate from my consultancy business. So my thinking was to purchase the house from them (income is plenty to cover potential mortgage payments) through company, and then charge them a small rent to stay there. This gives them plenty of cash to do as they wish with and mum won't have stress and worry of having to sell when the worst happens. Rather than receiving my share as 'inheritance' I was instead thinking of offering them £200k (I'm in fortunate position I'm not desperate for cash and they may try and insist I take some money off them as they've helped out my brother so much over the years). The house is in generally a good state but still has the 70's boiler and could do with some roof work, patio etc which I'd be prepared to pay for (and I assume I can offset against rent payments). Suppose its also for sentimental reason that I want to keep my childhood home.

Other than more expensive mortgages (Co. could put down 20% - would they want personal guarantee too?) and potential sticking point if I can only produce one years worth of accounts come October, is there anything obvious I'm missing? Would HMRC take an interest? Accountant is in spain otherwise I'd bother him

Fire_Fox

username901 wrote: »

My parents own their home, worth approx £250k. Both pensioners, Dad is in poor health, end stage heart failure so probably <12 months. They're asset rich and cash poor and have been looking in to equity release, which although I've not read up much on, does seem an expensive way of borrowing (for them). They're hoping to release £50k or so, and then when Dad dies he wants mum to sell up, move nearer me and split the house 3 ways for our inheritance (brother), which is very kind of them but I imagine they'll run in to issues if mum has to go in to care (although she had cancer some 7 years ago, she's in pretty good health otherwise).They don't want to sell up now, fair enough given dads health.

I just wanted to explore other options. They're quite proud people so I don't think they would want me to give them money each month, they'd rather I stick it in my kids savings. At the moment wife and I are drawing up to end of our 20% tax band so future dividends would be 37.5% taxed.

My LTD company is for consulting, main contract is a stable long term agreement, am just coming up to 1 years business. From some fairly quick reading I may need to setup an SPV for this kind of venture to keep it separate from my consultancy business. So my thinking was to purchase the house from them (income is plenty to cover potential mortgage payments) through company, and then charge them a small rent to stay there. This gives them plenty of cash to do as they wish with and mum won't have stress and worry of having to sell when the worst happens. Rather than receiving my share as 'inheritance' I was instead thinking of offering them £200k (I'm in fortunate position I'm not desperate for cash and they may try and insist I take some money off them as they've helped out my brother so much over the years). The house is in generally a good state but still has the 70's boiler and could do with some roof work, patio etc which I'd be prepared to pay for (and I assume I can offset against rent payments). Suppose its also for sentimental reason that I want to keep my childhood home.

Other than more expensive mortgages (Co. could put down 20% - would they want personal guarantee too?) and potential sticking point if I can only produce one years worth of accounts come October, is there anything obvious I'm missing? Would HMRC take an interest? Accountant is in spain otherwise I'd bother him

Numerous threads are variations on this theme.

Your parents should decide what they want, update their wills and prepare Lasting Power of Attorney documents, equity release if they choose.

You are potentially saddling your mother with an overly large house that she may struggle to afford the bills on. What does she want?

Do you have time to explore your options?

MEM62

Many potential issues here.

The easiest way is for you and your sibling(s) to approach your parents and offer financial help to them in a way that they find palatable. Put it to them that they supported you for so many years and now the shoe is on the other foot. You parents will can reflect any adjustments that they feel they may want to make as a result of receiving this help if they want to.

Equity release, in many cases, is an awful product and will be particularly so in this case as your mother does not have a limited life expectancy.

Sometimes pride has to be put to one side.

username901

Fire_Fox wrote: »

Numerous threads are variations on this theme.

Your parents should decide what they want, update their wills and prepare Lasting Power of Attorney documents, equity release if they choose.

You are potentially saddling your mother with an overly large house that she may struggle to afford the bills on. What does she want?

Do you have time to explore your options?

My parents don't know my financial situation so probably wouldn't have crossed their mind to see if I wanted to purchase. It was only last week that Dad mentioned they're going to do an equity release.

As for saddling my mum with a large house, she wouldn't as the money she'd receive from house sale means she could pretty much buy a property near me or require a very small mortgage (cheap in east midlands!)

I'm going to speak to them about it, I just wanted to know if it was feasible before I presented it as a possible option.

username901

MEM62 wrote: »

Many potential issues here.

The easiest way is for you and your sibling(s) to approach your parents and offer financial help to them in a way that they find palatable. Put it to them that they supported you for so many years and now the shoe is on the other foot. You parents will can reflect any adjustments that they feel they may want to make as a result of receiving this help if they want to.

Equity release, in many cases, is an awful product and will be particularly so in this case as your mother does not have a limited life expectancy.

Sometimes pride has to be put to one side.

My brother unfortunately isn't in a position to help financially (in fact parents are still helping him out despite limited means). I agree that equity release seems a poor option now I've read up more on it. For now I may see if they'll delay going down the ER route, I could take a directors loan instead of further drawings to give them time to have a proper think.

onwards&upwards

I don’t think you should be making any of these decisions right now.

Will your mum still be able to live in the house when she is on her own?

If so, help her practically to do that for atleast a year.

Also, i’ve Known people who were expected to die within 6-12 months who outlived that by years, and heart failure can be unpredictable in that respect.

xylophone

Are you in a position to lend your parents £50,000 and take a charge against their property as security?

The interest could be rolled up (although this has the potential to give you a tax bill when it is finally paid) and the loan itself could be repaid when your mother sells or be permitted to run on as a charge against her new property.

Do your parents own their property as tenants-in-common?

Your father could leave his interest to you and your brother in his will with an interest in possession to your mother.

kingstreet

A limited company BTL where you purchase a property with 20% deposit and the vendor who is also a family member continues to reside in it?

I suspect the number of lenders for this can be counted on no fingers.

username901

xylophone wrote: »

Are you in a position to lend your parents £50,000 and take a charge against their property as security?

The interest could be rolled up (although this has the potential to give you a tax bill when it is finally paid) and the loan itself could be repaid when your mother sells or be permitted to run on as a charge against her new property.

Do your parents own their property as tenants-in-common?

Your father could leave his interest to you and your brother in his will with an interest in possession to your mother.

No, we're not in a position to do that, we have some savings but I'll have a large tax bill for Jan from previous employment. Ill need to see if they're taking a lump sum because they're intending to spend it on something like their property to make it more disabled friendly and/or just so they have a bit more disposable cash.

username901

kingstreet wrote: »

A limited company BTL where you purchase a property with 20% deposit and the vendor who is also a family member continues to reside in it?

I suspect the number of lenders for this can be counted on no fingers.

Ok, so it's a no-goer.

Out of interest, how would a mortgage provider know I'm letting the property out to family, or is it generally just part of their terms and conditions prohibiting it?

silvercar

username901 wrote: »

Ok, so it's a no-goer.

Out of interest, how would a mortgage provider know I'm letting the property out to family, or is it generally just part of their terms and conditions prohibiting it?

In theory, they could ask for a copy of the tenancy agreement. In practice it’s a breach of the terms and conditions. If they found out they could call in the loan, I doubt they would if the payments were being met.