Buying with elderly father

elmo43

I’m hoping someone can advise or point me in the right direction please. I am looking to buy a new house with my father. He owns his house, no mortgage and is looking to rent his house out for around £1100 per month

I own my home and would be selling and use the cash for a deposit on a new house (deposit around £90,000) 

What is the likelihood of me and my father getting a joint mortgage or what options are available? Not sure who is the best people to contact on this or if I should just contact a mortgage provider and see what they say. I earn around £27,000 but we would hope to be using the rent from my fathers house to cover mortgage payments. My father is 73. Hoping for some advice on what options we have. Thanks a lot!

AdrianC

Why on earth does your father want to start a residential lettings business at the age of 73?

The rent might be £1,100/mo, but what sort of net yield is he expecting?

How much would you be looking to borrow on this other purchase? Have you taken the +3% SDLT into account?

And, come to that, do you really want to live with your father?

elmo43

He is not looking to start a business. As he is getting on in years he wants to move in with me but house is not big enough. He would be renting his house out as he does not want to sell. He also has a family member that would rent out the house. It’s not to make money, only to put towards a mortgage payment. And for the record I would love to have my father living with me :-)

AdrianC

elmo43 said:

He is not looking to start a business.

Yes, he is.

That is EXACTLY what letting a house out is.

He is providing a service (accommodation to a tenant) in exchange for a taxable income. How is that not a business?
Does he have the first clue about his legal obligations in running that business?

As he is getting on in years he wants to move in with me but house is not big enough. He would be renting his house out as he does not want to sell.

Why not?

Don't tell me, he's too emotionally involved with the property to want to let it go? That's the worst possible situation to be letting.
Well, almost the worst...
<waits for inevitable>

He also has a family member that would rent out the house.

Oh, lord, there we have it. A family member into a property with emotional involvement...

Will he be doing all the relevant pre-tenancy checks, or aren't they needed because it's family?
What if this family member decides not to pay the rent? After all, your dad owns two houses, so he can afford it, right...? Will he be willing to go through all the legal steps to regain possession?

It’s not to make money, only to put towards a mortgage payment.

A mortgage payment that won't be necessary if he sells and uses the equity released, right...?
Will the profit from the business, after tax, even cover the mortgage interest? If not, then he will be subsidising this tenant.
If there is a surplus, how long will it take to cover the +3% SDLT on the purchase?

And for the record I would love to have my father living with me :-)

It's easy to say that now...
He's only 73. He might have another 20 years of gradual physical and mental decline, which may well involve severe personality changes.
Do you want to spend your middle age years as an unpaid carer?
Would you be prepared to give your job up to do it?

Do you have a partner or kids? Do they want to take that job on, too?
If you don't, then what if you meet somebody?
What if you get a career opportunity that would involve relocation?

elmo43

I rented out my property for 10 years, so I have experience and we would get any advice required. It would all be done legally.  The same family member has been renting another family members property for 12 years, so far no issues and never a missed payment. I had more issues with my tenants over the years, but all got resolved.   Nothing is guaranteed of course but they would be treated the same as any other tenant, don’t pay then we would start the process for them to leave. 

princeofpounds

Without wanting to endorse your course of action - yes, you can theoretically get a mortgage with someone who is normally too elderly to receive one. But of course their income will not be assessed as part of it. I do not know how rental income for this elderly person figures into it but a good independent broker would be able to tell you (go to a higher-end one, not a call centre - this is a somewhat bespoke application that will need proper attention from an underwriter).

As for the controversies... all those points of caution are very valid. Some of them can be addressed by diligent research and management perhaps. But there isn't much practical point in holding on to the old property unless you are super-bullish on property prices; it loses a lot of the tax-efficiency that it has as a primary residence.