Buying a house on a Residential Mortgage for my parents. Any risks if they send us money?

youngy4130

Hi 

Me and my partner are looking at purchasing a second property on a residential mortgage and my parents will be living in it. (They’ve been renting for years and im worried there is insecurity around their future) 

The property is well within our affordability and we’re seeing it as both an investment and a way to look after them. 

My parents want to send us some of the money they will save in rent to put away in a savings account for our future children. I’m thinking as long as this is less than £3k per year then it’s ok as a gift? 

As I missing anything? 

SpiderLegs

Can you clarify. Does the lender know that you will not be living in the property?

youngy4130

SpiderLegs said:

Can you clarify. Does the lender know that you will not be living in the property?

Yes they’re aware we won’t be living there. 

SpiderLegs

I think you will need to be careful that they aren’t giving you any money that could be construed as rent.

if the money is ultimately going to children then better that they actually give it direct to them 

youngy4130

Well we don’t have children yet, they’re going to send it to me to manage. Basically they’ll have the money spare and want to give it to us. 

We can cover the mortgage ourselves this would just be a gift from them. 

getmore4less

You could hold the money as a bare trust on their behalf  for them to gift at some future time to whoever they want.

Probably better that way as it then stays outside your estates and in theirs unless they have IHT issues

K_S

@youngy4130 What you're doing isn't uncommon. The usual preference (if you have a 25% deposit) is to go for an interest-only regulated BTL (which is meant specifically for family members) rather than a residential mortgage. Of course if your deposit is less than 25% then an I/O regulated BTL might not be an option.

youngy4130

We don’t have the 25% and don’t plan on having any tenancy agreement in place. 

They’re just going to be living in our second house. 

I just want to understand if there would be problems if they did gift us money? 

SpiderLegs

youngy4130 said:

We don’t have the 25% and don’t plan on having any tenancy agreement in place. 

They’re just going to be living in our second house. 

I just want to understand if there would be problems if they did gift us money? 

Well how about you will be their landlord and you have to follow all the legalities of being a landlord including paying tax on the rent they will be paying you?

youngy4130

As I said earlier, they’re not paying us rent. The house is an investment that we can afford and we’re doing it to support my parents as they get older and look at retirement. 

Owleyes00

I would suggest it would be easier for your parents to put the money in a savings account which they can leave to you (for your children) in their will. 

Although you don’t consider the money rent, it may not be seen this way by HMRC.