Moving parents into property without selling their existing property...

dantheman1967

Hi all,

 My wife & I are looking to move my parents into a property nearer to where we live in Leicestershire.

 The problem that I have is that the property will need some remedial work doing to it before they can move in (my mum is a wheelchair user). As such, I envisage that they will need to stay in their own property whilst this work is done. The intention will then be to sell their current property once they have moved into the new property.

 They currently own their own house (no mortgage, with the title deeds in both of their names), estimated to be worth circa £180,000. The new property is likely to cost circa £200,000. They do not have the cash to make up the difference, plus the extra for fees etc.

 They do have a pension income, but I do not think that it will be sufficient to service a new mortgage on the property. Therefore, I’m thinking that our options are;

 i)                a mortgage in their names with my wife & I acting as guarantors?

ii)              my wife & I getting a mortgage for the new property, but I’m assuming that this will have implications given that we will not be living in the property (LTV based upon how much deposit we can stand up at the time, but likely to be up to £50k so 75% LTV)

iii)             should we sell as part of a chain, my wife and I could make up the shortfall of circa £25k if necessary.

 My wife & I own our own house, which is worth circa £650,000. We have around £95,000 left on our mortgage, with the title deeds in both of our names).

I am in the process of engaging a broker to further understand our options.

 A key question for me is the stamp duty implications. I’m assuming that i) & ii) would be classed as buying an additional property or second home from a stamp duty standpoint? The implications if this is correct would be that the stamp duty liability would be £7,500 rather than £1,500..?

 Thanks,

 Dan.

AdrianC

The easiest way would probably be for you to remortgage your own home, and lend them the money with a charge against their purchase.

Yes, they'll have to pay the +3% on purchase - but that can be reclaimed on sale of the old place.

eddddy

dantheman1967 said:

 My wife & I own our own house, which is worth circa £650,000. We have around £95,000 left on our mortgage, with the title deeds in both of our names).

As AdrianC says, the easiest and cheapest option looks like replacing your £95k mortgage with a £300k mortgage, and lending £200k to your parents, secured by a charge on their new house.

Then, once your parents sell their current house, they repay you £180k of the loan, and you pay off £180k of your mortgage.

You'd need to find a mortgage which let you pay off £180k within the first few months without penalty (maybe a flexible offset mortgage).  And obviously, you'd need to consider mortgage application fees, and whether you end up with a better/worse interest rate than you're on at the moment. Also you'd need to pass the lender's affordability checks for a £300k mortgage.

dantheman1967

Ok, thanks both. I didn't realise that you could reclaim the +3% stamp duty. I appreciate your help :-)