Pension v gift house

magic_genie

My father and his wife live in a lovely flat in one of the North counties lovelier cities - value 250k. He is 65, she is 55.

They now wish to retire to a lovely little cottage, well... I say little, they've found one they want - it's 370k.

They want to buy this house, but can't get a mortgage due to age and don't have regular incoming money nor savings. They've proposed that I ("their trusted son") take out the mortgage for 120k and when they die, the house is mine.

My initial thought was 'great', as I don't have a pension and I very much want to help my dad and his wife.

But, since then, I've wondered if this is something I shouldn't rush into.

For example one issue I have thought of - I have a brother and half sister (from my dads previous marriage) and my dads wife has 2 sons. So, although I'm flattered, would it be not fairer to get a mortgage, but all 5 children contribute to it - then the house belongs to all 'in the end'.

That was my first question, and I also wondered if anyone else had any thoughts or implications regarding this proposal.

Hope to hear from you, kind regards
Alex

Rafter

Hi Alex,

Sounds like an interesting dilema and similar to one we have with my mother in law and her house.

We effectively underwrite her mortgage and, although she makes some contribution to the payments, there is a shortfall that is made up from the equity in the house so over time we own a greater and greater percentage of the property.

Is your dad proposing to make any contribution to the mortgage?

What happens when one of them passes away? Would the other one be able to afford the bills?

What do your siblings feel about this?

Can they afford the higher council tax and bills for this larger property given their limited income?

You should be able to structure it in such a way that it is fair for everyone involved though.

Good luck.

R.

EdInvestor

Hi Alex

magic_genie wrote:

They want to buy this house, but can't get a mortgage due to age and don't have regular incoming money nor savings.

Er, so what are they doing for money?

Shouldn't they be "downsizing" rather than upsizing at your expense?

rrwfotr

Hi Alex,

I would be very carefull before jumping into anything like this. You need to discuss this all with members of your familiy and draw up a plan of whats going on. What usally happens in this sorts of matters is that every thing is taken into a verbal contract i.e you do this I will do that etc etc.

You also need to consider the inhertiance tax aspect of the property who will own it ? i.e will you as your paying the mortgage or will their be joint ownership and I'm sure Gordon Brown and his mates will be on your case if it's joint ownership in the future whenyour folks pass away.

What ever you decide I strongly recommend you vist a lawer and draw a legal agreement what ever happens as you never know what might happen in 10 - 15 years down the line. Your step siblings might have a change of mind when you stand to get a 700 - 800k house as the value increases over time.