Can we buy our parents house?

Brie

Ellalou said:

What we do have in our favour is we have 3 years left on the interest only term. I would just like to try and sort this situation out sooner rather than later to relieve the stress and uncertainty 

planning ahead is a very good idea!

Ellalou

Brie said:

Ellalou said:

He doesn’t have any other property, earns a good wage in IT. I was hoping one of us (other siblings) could go on the mortgage with him but don’t think that will be possible if we don’t live there and also have mortgages ourselves? 

The problem is my parents are 67 and 65 so the most of a mortgage term they would get if to go on the mortgage with my brother is probably to 75 and then we would be a very large monthly amount per month. 

I’m thinking a new mortgage altogether in my brother’s name / with or without another sibling on it may be our best option to keep the house. Then we can take it out over 20/25 years and comfortably pay it off.

The main thing I want to do is remove the financial stress from my parents and let them live comfortably in the house without having to worry. 

Surely there is a way! 

So potentially B1 could buy the house from your folks and then they will be his lodgers.  This will make him their first line carer and that's not a duty to be taken on lightly.  That said if he's still living at home he is probably well used to their little quirks.  That would be the simplest solution so the rest of you wouldn't be tangled in financially.

The only other issue would be that B1 could take it into his head that he wants the place to himself.  And the folks have a large bank balance so could conceivably buy a small flat somewhere.  A bit of legal wizardry might help with that about them having a lifetime interest or something. 

While you're talking to the lawyers - do make sure your folks have POAs & wills in place.  Much easier to do it sooner rather than when it's too late.  Might also want to see about third party authority on their bank accounts just to smooth things along if they should be temporarily ill or something. 

Thank you, yes my brother has been living with them all along. It’s him, my parents and a cocker spaniel. He’s well used to the situation. It’s a large house where he has a large room and office upstairs and they have 2 living areas. 

 

Looking into wills/ POA is also something we want to sort as they move into retirement. 

Lots to think about but hopefully we can get a mortgage in my brothers name. 

It’s the tax implications though as we would want him to get the mortgage for what they have outstanding and not the full market value to allow him to pass any affordability assessments. That was why I was i
hoping one of us could also go on the mortgage but I know it’s not as easy as that! 

silvercar

You can have mortgages where other people are on the mortgage but not on the deeds of the property. Parents often use this to help their kids on the property ladder. So the property is owned by the (adult) kid and the mortgage has a parent and the kid on it. The parent needs to show sufficient income to afford to pay the amount of mortgage not covered by the kid's own income.

Ellalou

silvercar said:

You can have mortgages where other people are on the mortgage but not on the deeds of the property. Parents often use this to help their kids on the property ladder. So the property is owned by the (adult) kid and the mortgage has a parent and the kid on it. The parent needs to show sufficient income to afford to pay the amount of mortgage not covered by the kid's own income.

Would that be classed as a guarantor mortgage? 

silvercar

Ellalou said:

silvercar said:

You can have mortgages where other people are on the mortgage but not on the deeds of the property. Parents often use this to help their kids on the property ladder. So the property is owned by the (adult) kid and the mortgage has a parent and the kid on it. The parent needs to show sufficient income to afford to pay the amount of mortgage not covered by the kid's own income.

Would that be classed as a guarantor mortgage? 

I think so, or some call it single owner, dual borrower or something like that.

Annisele

Have you considered having your brother buy part of the house, and then your brother and your parents owning it jointly with unequal shares? Maybe your brother could own 60% or so, with your parents having 20% each?

If they could do that, the mortgage would likely have to be in all three names - and they'd likely want specialist advice. But it would avoid your parents having to make a substantial gift that they can't afford to make, and it would avoid the capital gains tax problem of the house being owned by somebody who didn't live there. (It would also cause all sorts of other problems and risks, which could be major or minor depending on circumstances. Eg your brother might not be fussed about losing his first time buyer privileges, and your parents might not be fussed about the risk of losing their home to the divorced spouse your brother hasn't even met yet. But there are many more pitfalls.)

The difficulty with having your brother/siblings on the mortgage without your parents is that lenders are unlikely to entertain the idea. From a lender's perspective, if the borrower stops paying the loan the lender wants to repossess. But if the former owners are still living in the property, having "gifted equity"/swopped equity for the right to live in the house for the rest of their lives, that makes repossession complex - the former owners' rights might come before the lender's rights. Which makes lenders wary of going anywhere near those sorts of arrangements. But if everybody who lives there is on the mortgage, then from the lender's perspective all of them are borrowers - and the lender can (ultimately, and after court action) kick out any borrowers who don't pay.

Ellalou

Annisele said:

Have you considered having your brother buy part of the house, and then your brother and your parents owning it jointly with unequal shares? Maybe your brother could own 60% or so, with your parents having 20% each?

If they could do that, the mortgage would likely have to be in all three names - and they'd likely want specialist advice. But it would avoid your parents having to make a substantial gift that they can't afford to make, and it would avoid the capital gains tax problem of the house being owned by somebody who didn't live there. (It would also cause all sorts of other problems and risks, which could be major or minor depending on circumstances. Eg your brother might not be fussed about losing his first time buyer privileges, and your parents might not be fussed about the risk of losing their home to the divorced spouse your brother hasn't even met yet. But there are many more pitfalls.)

The difficulty with having your brother/siblings on the mortgage without your parents is that lenders are unlikely to entertain the idea. From a lender's perspective, if the borrower stops paying the loan the lender wants to repossess. But if the former owners are still living in the property, having "gifted equity"/swopped equity for the right to live in the house for the rest of their lives, that makes repossession complex - the former owners' rights might come before the lender's rights. Which makes lenders wary of going anywhere near those sorts of arrangements. But if everybody who lives there is on the mortgage, then from the lender's perspective all of them are borrowers - and the lender can (ultimately, and after court action) kick out any borrowers who don't pay.

Thank you, it’s not something we’ve thought of buying part of the house..we could look into this. 

I just wasn’t sure how this would work with my mum and dad being near retirement. If all 3 are on the mortgage then would the mortgage only be able to have a term of 8/9 years (when they are 75). That was the reason we were thinking in my brothers name, he lives there and plans to stay there and then the mortgage could be for a longer term (he’s 30) thus reducing the monthly payments? 

What type of specialist do you advise to see? Just a specialist mortgage advisor? I know there are a lot of legal / tax implications to consider here.

Ms_Chocaholic

How big is the house and what is its current market value? Would they not consider downsizing as they will save on energy costs/Council tax too.

Ellalou

Ms_Chocaholic said:

How big is the house and what is its current market value? Would they not consider downsizing as they will save on energy costs/Council tax too.

It’s a 3 bed house, they really don’t want to as they like where they stay. 

It’s average bills they are paying not excessive 

the market value is approx £300-£320k

Annisele

Ellalou said:

What type of specialist do you advise to see? Just a specialist mortgage advisor? I know there are a lot of legal / tax implications to consider here.

I'd probably want to see a mortgage broker for the "is this possible" end of things, a solicitor for the "is this a good idea" end, and possibly an accountant for the "how much will this cost in tax" bit. But I'd start with the broker - if the numbers don't stack up, then there's no point paying a solicitor to tell you whether the impossible plan would have otherwise been a good one.

An experienced broker can usually give a pretty good idea of the sorts of risks and benefits you'd be exposing yourselves to. The broker won't do the legal stuff you'd likely need if you were to go ahead with this, but a good broker can hand hold you through telling you what you need from other professionals. I probably wouldn't go for one of the no-upfront-fee volume brokers for this; it's a fairly niche scenario and you'll likely need to pay somebody.

Some lenders will go up to age 80 in some circumstances, but I've no idea if those are the same lenders that would be OK with three people on a mortgage. It will also rely very much on income - if your brother and your parents' combined pension and employment income is £30k or so, I'd suspect the plan would fail on affordability regardless.