Buying parents house - Good or Bad?

pootleflump

Hi everyone,

My parents have a small 2nd floor flat and are desperate to move to a house with a garden. They have a small mortgage and if they sold their flat,could move into a nice house for an extra £20,000. Me and my husband are thinking of either giving them the extra money, as it would just be investing in our inheritance, or taking over their mortgage and getting their new house in our name.

Can anyone advise us on the pro's and cons of each option please, such as where we would stand on tax? etc.

We would like to help them out but are unsure if it would be wise to put all of our savings into it.

Hope to hear soon

pootleflump.

PasturesNew

If you buy the house in your name, you will own it.
So you'd need a Buy to Let mortgage, which is most likely to be a slightly higher interest rate than a residential mortgage.

As they'd then be your tenants you'd have legal obligations.

And what if you defaulted due to illness/whatever - and your mortgage company chucked them out on the street as they repossessed.

What if you split up from your husband and he wanted half - kicking your parents out?

What if ... what if ... what if ....

There's a lot to think about. Others will be more specific in these and other areas.

Great idea, just make sure you get it right from the start though.

P.S. I've not suggested selling the flat then waiting 2 years for property values to come down so they can buy a house in 2-3 (or more) years' time with their cash and pocket the difference.

pootleflump

Thanks PasturesNew, I think there probably are too many 'what if's' with us buying it... I do want to help them though, I see it as an investment at the same time as it will be my inheritance, however my husband thinks it's just giving them £20,000 for nothing.

lifeisgood

Assuming their age and income means they wouldn't be able to take out another mortgage, would you be able to clear their present small mortgage as well as putting up th £20,000 they need?

If so, you should take advice, but could possibly treat the total as a loan and put a charge on their new property.

Then if it had to be sold to pay off any debts, i.e. care costs, you would get your original investment back, and have made your parents' lives happier in the meantime.

You give the impression in your op that you expect to be the only beneficiary, but your inheritance doesn't exist until both your parents die, and then life can be full of surprises.