Right to Buy - buying in cash and then re-mortgage

tyty21

annabanana82 said:

I don't think a 90% remortgage would work, you would need the HA to sign off a deed of postponement but with a 90% mortgage plus the liability of the RTB discount your likely to be over the house value

What is a deed of postponement?

tyty21

Snookie12cat said:

tyty21 said:

Slithery said:

It's a terrible idea.

Your remortgage can't be a standard residential as you won't be living there. A let to buy mortgage will have a maximum LTV much less than 90%, but will expect you to be actually getting a rental income as well as probably not allowing you to let to family.

There's also the fact that your parents would be giving up a secure tenancy that has the possibility of moving to a more suitable property if they need it. Who is going to be responsible for all the maintenance costs?

I could get a residential mortgage for the time being by continuing to live there so 90% LTV would be possible. Even if switching to a BTL mortgage, taking 75% of the FMV back out would mean getting all of the money back that I had advanced to buy it from the HA.

Rental payments could be an option but not if lenders aren't going to want you to lend to family. 

I would obviously be responsible for the maintenance costs. 

Call a few brokers and ask, they will tell you if they have any lenders who will let you rent to family. 
If you can afford the crazy inflated stamp duty, then it might work. Use the calculator on gov website, as depending the property value you intend to purchase next it could be very expensive and scupper your plans.

If you are a FTB though you will also lose any FTB discount in stamp duty if you did this.

Yes I think I will try and ask a few brokers whether there are lenders who will accept renting to family.

I don't think the stamp duty is a huge issue. The HA house will be sub-threshold for FTBs so none to pay there. If I then went on to purchase a second house with a resi mortgage then even on a £700k London flat, the extra SD is circa 20k (whereas the RTB discount will be circa 85k).

tyty21

Perhaps a better idea is to try and find a lender who will lend to them into retirement but is it possible to make me the sole person responsible for the payments? Then they would leave me the house - should be under the IHT threshold. 

The issue there is if they need to go into a care home then what is to stop the council taking the house (despite the fact that I have paid for all the mortgage payments).

Snookie12cat

tyty21 said:

Perhaps a better idea is to try and find a lender who will lend to them into retirement but is it possible to make me the sole person responsible for the payments? Then they would leave me the house - should be under the IHT threshold. 

The issue there is if they need to go into a care home then what is to stop the council taking the house (despite the fact that I have paid for all the mortgage payments).

I don't think so unless they got the mortgage and you paid it without telling anyone, but the problem is then you are paying for something you have no stake in.

strawb_shortcake

A deed of postponement is a legal document confirming that a lender holding a charge against the property – such as a secured loan – agrees to postpone their charge so it does not have to be paid off when the remortgage takes place.

Without one of these you can't remortgage, but the numbers aren't going to add up, if the house was repossessed then you couldn't pay all the liabilities from the house sale

tyty21

annabanana82 said:

A deed of postponement is a legal document confirming that a lender holding a charge against the property – such as a secured loan – agrees to postpone their charge so it does not have to be paid off when the remortgage takes place.

Without one of these you can't remortgage, but the numbers aren't going to add up, if the house was repossessed then you couldn't pay all the liabilities from the house sale

Ok so are you saying that the HA takes a charge over the house when you purchase it from them (i.e. to recoup the discount if you sell it)?

theoretica

tyty21 said:

Perhaps a better idea is to try and find a lender who will lend to them into retirement but is it possible to make me the sole person responsible for the payments? Then they would leave me the house - should be under the IHT threshold. 

The issue there is if they need to go into a care home then what is to stop the council taking the house (despite the fact that I have paid for all the mortgage payments).

What do you hope to achieve by being responsible for the payments?  If you don't pay, your parents would risk having their home repossessed - exactly the same situation as if it was in their name and you gave them the money each month.

Do you have a high enough income to cover (in the bank's opinion!) affordability for mortgages on both properties?  Would stamp duty work out cheaper if you bought your property first?

strawb_shortcake

tyty21 said:

annabanana82 said:

A deed of postponement is a legal document confirming that a lender holding a charge against the property – such as a secured loan – agrees to postpone their charge so it does not have to be paid off when the remortgage takes place.

Without one of these you can't remortgage, but the numbers aren't going to add up, if the house was repossessed then you couldn't pay all the liabilities from the house sale

Ok so are you saying that the HA takes a charge over the house when you purchase it from them (i.e. to recoup the discount if you sell it)?

Yes, it'll drop off once the 5 years have passed 

strawb_shortcake

tyty21 said:

annabanana82 said:

A deed of postponement is a legal document confirming that a lender holding a charge against the property – such as a secured loan – agrees to postpone their charge so it does not have to be paid off when the remortgage takes place.

Without one of these you can't remortgage, but the numbers aren't going to add up, if the house was repossessed then you couldn't pay all the liabilities from the house sale

Ok so are you saying that the HA takes a charge over the house when you purchase it from them (i.e. to recoup the discount if you sell it)?

Yes, it'll drop off after 5 years

Chandler85

You become a landlord to your parents essentially and need to wait for 5 years until the HA charge goes. So if you are happy to give up any FTB discounts on properties, be a proper landlord (assuming you won't still be there in 5 years, which seems to be the case) and can afford to buy or rent your own place while maintaining your parents.  Then yes go for it, after all, the ultimate goal here is to get a house/ flat for cheap so you can make money on it later, basically a long term investment, otherwise you wouldn't already be asking about inheritance tax.

Just make sure you and your parents understand the downsides first, around maintaining the property, if the mortgage cannot be paid for any reasons then your parent potentially become homeless.  You could sell the house and make them homeless etc.

The older tenancy agreements with local HA or councils are generally very good for the tenant, the newer ones not as much, but that's the same for pensions and all sorts, so it's just the modern society.  Your parents are giving up this tenancy and the chance to move into a HA bungalow or similar in future on the same tenancy (this might no be relevant, as the property might be appropriate for someone whose very elderly already).