Purchasing property from family living there so I can take out a mortgage on it for works

darkwarrior

Hi all, I would just appreciate some opinion if possible.

I live in a mortgage-free home that belongs to my parents. Because of unfortunate circumstances we have taken on care of my nephews and niece but the house is small and I am getting extension and loft conversion works done. I tried ringing up about a mortgage the other day and the response I got was a bit confusing.

Essentially, my mum will sell me the house for the maximum I can borrow, and that money will pay for the works. The house value is just over double what I can borrow.

When I tried to go through the mortgage process, the consultant was adamant that if my mum is selling me the house for say £100K and the house is worth £240K, that I would need to come up with the other £140K as a deposit. This blew my mind and doesn't make any sense to me and I'm really confused.

I said I just wanted £100K to buy it for £100K but she said this was a 100% loan-to-value loan and that can't be done. I argued that it's like 40% of the value, the house equity is the deposit but she said I was wrong.

The only alternative I have come up with is to just transfer ownership of the property to myself and remortgage it instead. I only wanted to avoid this as I have a Help to Buy ISA and obviously I'd like to take advantage of the cashback from that as well.

Is there a way I can purchase the house and use my ISA to get the cashback or is taking ownership and remortgaging the only way?

Thanks in advance.

SonnyLumiere

From what you have said, you don't seem to be doing this for tax avoidance reasons. However, there might be tax implications arising from your plan for you and your parents. Worth reading this: https://www.property-tax-portal.co.uk/selling-a-house-below-market-value-and-trying-to-avoid-taxes.shtml

housebuyer143

I believe you need to find a lender who allow family gifted deposits in the form of equity, as that's what it is. As you say, they will gift you 40% equity as your deposit and you will get a mortgage for 60%. 
Who did you speak to? It might be worth going to a mortgage broker or a better one who has more experience in this. 
Many lenders will allow this, but not all of them..

eddddy

darkwarrior said:

I live in a mortgage-free home that belongs to my parents.

It's not clear from your post - do your parents live in the house as well, and will they continue to live there after you purchase the house?

If they won't be living in the house after your purchase, it sounds like you want a "Concessionary Purchase Mortgage".

I think that only a few mortgage lenders offer them. Did you phone a mortgage lender or a mortgage broker?

If you take a look at these 2 lenders' descriptions of "Concessionary Purchase Mortgages", they seem to match your requirements:

https://www.nationwide-intermediary.co.uk/lending-criteria/purchase-types
https://intermediary.tsb.co.uk/criteria/residential-criteria/concessionary-purchase/


(But if your parents will be living in the house after you purchase it, I think that will be a problem.)

darkwarrior

We're all going to be living there, they're just too old to take out a mortgage for the amount we need.

jimpwarsop

darkwarrior said:

We're all going to be living there, they're just too old to take out a mortgage for the amount we need.

Have your parents alternative means to pay for care should they need it ?

darkwarrior

No but they're only in their sixties so hopefully that won't be a problem for a long time.

jimpwarsop

darkwarrior said:

No but they're only in their sixties so hopefully that won't be a problem for a long time.

So how will they pay for any care they need ?

silvercar

jimpwarsop said:

darkwarrior said:

No but they're only in their sixties so hopefully that won't be a problem for a long time.

So how will they pay for any care they need ?

It’s only a problem if they need imminent care or can foresee a time when they will do so. If they are currently in good health then they can do what they like with their money. No one looks back 15 years and makes a judgement call on how they spent their money, if they did a lot of people would come unstuck.

OP, you are basically buying for full price with your parents gifting you a deposit of the gap between the mortgage and current value. As you are connected parties, stamp duty may be due. No reason not to use your help to buy to assist with the deposit of you wish.

eg property value 240k, you purchase made up of 100k mortgage, 12k HTB savings, 4k government HTB contribution, gift from parent 124k. 

There may be a possibility of getting a mortgage whereby you mum stays as the only owner on the deeds, but you and her have a joint mortgage. There are only a few lenders that offer this, including Barclays and Skipton. We used this to help my son onto the property ladder as his sole income wasn’t sufficient for the mortgage he wanted. 

nicmyles

silvercar said:

jimpwarsop said:

darkwarrior said:

No but they're only in their sixties so hopefully that won't be a problem for a long time.

So how will they pay for any care they need ?

It’s only a problem if they need imminent care or can foresee a time when they will do so. If they are currently in good health then they can do what they like with their money. No one looks back 15 years and makes a judgement call on how they spent their money, if they did a lot of people would come unstuck.

Eh? The time to consider how you will pay for your future care is surely before you hit retirement age, when your ability to earn becomes less. Perfectly reasonable thing for people in their 60s to be considering. 

What action is a person in their late 70s supposed to take if they start looking at this then and realise they don't have enough cash? At least in your 50s-60s, you can take some action if you see there's a problem.

With the current social care situation, anyone putting off these discussions or assuming state support will be there is being optimistic *at best*.

darkwarrior

silvercar said:

jimpwarsop said:

darkwarrior said:

No but they're only in their sixties so hopefully that won't be a problem for a long time.

So how will they pay for any care they need ?

It’s only a problem if they need imminent care or can foresee a time when they will do so. If they are currently in good health then they can do what they like with their money. No one looks back 15 years and makes a judgement call on how they spent their money, if they did a lot of people would come unstuck.

OP, you are basically buying for full price with your parents gifting you a deposit of the gap between the mortgage and current value. As you are connected parties, stamp duty may be due. No reason not to use your help to buy to assist with the deposit of you wish.

eg property value 240k, you purchase made up of 100k mortgage, 12k HTB savings, 4k government HTB contribution, gift from parent 124k. 

There may be a possibility of getting a mortgage whereby you mum stays as the only owner on the deeds, but you and her have a joint mortgage. There are only a few lenders that offer this, including Barclays and Skipton. We used this to help my son onto the property ladder as his sole income wasn’t sufficient for the mortgage he wanted. 

Thanks for this, the type of mortgage turns out to be a Genuine Bargain Mortgage, which can be done, so a lot of stress is off my back there. I've booked an appointment for next week!