Buying a property for parents to live in

motherofawhirlwind

I'm looking to buy a property for our parents to live in full time. Mortgage advisor said to buy as a 2nd home (to avoid buy to let mortgages which don't let you rent to family generally) and then don't have a tenancy agreement which would upset a normal lender. We can cover the mortgage for them, but they'll pay the bills. They might try and give us something towards the mortgage too.

My main questions are - is that right/legal???

Do we put the bills / Council Tax in their name or ours? They don't currently have a property, and don't pay Council Tax or utilities.

Has anyone else done this and how did you handle it please?

hazyjo

Doubt a lender would give you a mortgage on it if you're not living in it. Obviously it would be BTL. Especially as I presume you have a property elsewhere.

They would pay the council tax if they're living there.

So where are they now if they're not paying council tax? Surely they must be registered as living somewhere.

Can you remortgage yours and buy it cash? Only way I can see round it. If in your names, you would have landlord responsibilities. And prob extra stamp duty.

motherofawhirlwind

They're living on a boat currently but that's no longer sustainable. We're OK with the higher stamp duty for a 2nd home / holiday home.

GDB2222

motherofawhirlwind wrote: »

They're living on a boat currently but that's no longer sustainable. We're OK with the higher stamp duty for a 2nd home / holiday home.

You are also letting yourself in for capital gains tax if the property appreciates in value.

I think you should think about giving your parents the deposit money and them buying. Presumably, you'd have to guarantee the mortgage. Interest rates are likely to be lower than for a second home mortgage.

You have not mentioned pensions and benefits. If they buy, they might qualify for help with the mortgage payments.

Bossypants

GDB2222 wrote: »

I think you should think about giving your parents the deposit money and them buying. Presumably, you'd have to guarantee the mortgage. Interest rates are likely to be lower than for a second home mortgage.

I could be wrong, but I don't think guaranteeing a mortgage is an option anymore? Lenders have become extremely strict (for good reason), either the prospective borrowers meet the criteria or they don't, in which case hard luck. At least, this was the message my family got a couple of years ago when we were hoping to do something similar.

Question to the OP: Leaving aside the lender questions for a minute, what is the plan if the worst happens to you and your partner? If you intend to leave the house to your parents, you would also leave them enough cash to cover the outstanding mortgage (assuming they wouldn't be eligible for a mortgage of their own). Otherwise they would be forced to sell their home.

AnotherJoe

motherofawhirlwind wrote: »

I'm looking to buy a property for our parents to live in full time. Mortgage advisor said to buy as a 2nd home (to avoid buy to let mortgages which don't let you rent to family generally) and then don't have a tenancy agreement which would upset a normal lender.

Yes others have posted here about what is called a second residential mortgage for this type of situation. Not all lenders do them.

We can cover the mortgage for them, but they'll pay the bills. They might try and give us something towards the mortgage too.

Presumably on an ad hoc basis so you are confident you can cover the mortgage?


My main questions are - is that right/legal???

Why on earth would it not be legal to buy a house and choose who you let live in it? I cant even imagine what you might be thinking to raise that as a concern.We haven't gone that much into a fascist or communist state yet have we? (and what does "is that right" mean????)


Do we put the bills / Council Tax in their name or ours? They don't currently have a property, and don't pay Council Tax or utilities.

Absolutely it should be in their names it will help with benefits, if they arent named on utilities and council tax that would be a massive issue claiming benefits. PLus being on electoral roll has other benefits also.

Has anyone else done this and how did you handle it please?

The other thing you could look at is, raising a mortgage on your own home and then being a cash buyer for 'their' house. That's what i did a few years ago (for a child not parents but its the same thing)

Downside is, if you get into financial trouble, you'd be chucked out of your house whereas if you have a mortgage on 'their' house and you get into financial trouble and are forced to sell it, you have some leverage with the council perhaps putting them into elderly care property because they are homeless. So, probably much better to go the route your adviser recommended.

motherofawhirlwind

"We haven't gone that much into a fascist or communist state yet have we?" That did make me laugh, AnotherJoe. I meant "is that right" as in its OK to have someone live in your property without a tenancy agreement - we want this to be legal, not to cause them problems with registering for GP services, be secure etc. Could just imagine getting into some kind of loop of bureaucratic nonsense because we'd missed something.

Financially, we can cover the mortgage.

AnotherJoe

motherofawhirlwind wrote: »

"We haven't gone that much into a fascist or communist state yet have we?" That did make me laugh, AnotherJoe. I meant "is that right" as in its OK to have someone live in your property without a tenancy agreement - we want this to be legal, not to cause them problems with registering for GP services, be secure etc. Could just imagine getting into some kind of loop of bureaucratic nonsense because we'd missed something.

Financially, we can cover the mortgage.

Of course as I said we haven't gotten into that sort of state yet.