Parents, who'd have them??

elliot330

Hi,

As with all other posts, a problem shared is a problem halved. I hope anyway.

My Mother dropped a bombshell on me the other day. She asked whether I'd like to buy her house and rent it back to them. I soon found out why.

Their mortgage is currently £96k and costing £700 an month interest only. House is worth about £130k. They've also got a really dodgy loan for £15k @ 19.9% APR 1.35%monthly.

I'm soooo god damned annoyed with her and her fella. Anyway moving on, I'm after several bits of advice and what you think of my proposals.

Advice number 1,
The original loan was for £15k but by the time several insurances have been added on, the total is just under £21k, over 180 months. They have been paying for 18 months, missed 3 payments. The settlement letter arrived yesterday, with lots of figures on, starting at £54k total, minus £26k interest, minus £5600 they 've paid, minus a few other things, the settlement figure was just under £21k, but with a note saying something about rebates, ( coming down, settlement going up! ) Is this legal and whats the best way to pay this off?

My idea, was to apply for a BTL mortgage for £110k on the property and a personal loan for £7k, thus paying off their very high mortgage and loan. This should reduce their current outgoings from £1000 PM to £460 mortgage plus £190 loan totaling £650. Thus allowing them time to breath and stop my mum being so ill with worry.

What do you think, and any advice would be greatly received.

Cheers
Elliot

BenL

I'd advise your parents to move their mortgage as they are getting massively ripped off unless they are repaying over a short time.

I just ran £96000 through the nationwide calculator.

An interest mortgage of £96K should cost £383 a month

Repayment - £550 a month.

Both 2 year fixed rates and over 25 years.

They would then be able to put more money towards the loan payments.

With the current mortgage have they got money put away to pay back the capital at the end of the mortgage term as they are only paying the interest.

You haven't said anything about your circumstances, if you wanted to help out would you be able to get funding from banks??

Hope all works out ok.

crystal_clear

Hi Elliot
The info you have given may need more background to it to be able to get the correct advice.
Why are they paying such a high rate for there mortgage ?
Can they not get a mortgage offer themselves ?
And if not do they 1) have bad credit history or 2) have they other debts for which they may be considering bankruptcy for ? hence wanting you to buy out the property and rent it back to them ?
If 2) is the reason and i am not saying it is i do believe that you can buy out the property but at current market value if you bought for less to save it from bankruptcy then that can be classed as deception by the OR and can have serious concequences with it.
But i am no expert its just bits i picked up along the way as i wanted to sell my home to a family/friends to save it if i get forced to that stage and cannot find a way to do it legally at a cost i/they can afford either
I am sure someone more with more info will be along shortly but you may want to consider giving a little more in the way of reason behind this....
I hope all works out well for you and parents

jonesMUFCforever

What would happen IF you did buy the house off her and she would not/ could not pay the rent? Would you throw her out??
If the answer is no then IMO don't even consider it!
Do you have the funds or income to pay for the house ( in addition to where you are living now?).
Not wishing to sound cruel but your mother has made her bed and she and her fella should lie in it!Do not feel guilty if you find that you cannot help her financially but tell her that you will be there for her to help in other ways even if it means an IVF or Bankruptcy.
Eric

elliot330

Hi, Thanks to all for replying,

My finances are ok, to a degree. I'm earning and got a mega mortgage. I have tenants in another house ( my old house ) which is 75% mortgaged.

My parents mortgage is so high, due to running up high CC bills a few years ago, therefore the idea was to increase the mortgage to pay them off, unfortunately the only offer they could get in their circumstances was the one they're paying at the moment.

They currently have two debts, mortgage for £96k and a secured loan for £15k, albeit £21k to clear it. Totaling a £117k debt.

My Mums idea is to market the house, sell up, pay off the loans and rent, as the repayments are crippling her. £700 mortgage, + £300 loan.

The house next door was on the market for £130k, sold for £125k.

I searched the net all day yesterday, looking at bankrupcy as they as almost in negative equity, but from my limited understanding, they would still be liable for the loan.

My idea is to offer them £117k for the house, to clear their debt, and rent it back to them for whatever the cost of the mortgage interest is, which currently is about £490 and month. For Mortgage purposes, I would be telling the mortgage company that i've purchased it for £130k. Or is that not possible??

Crystal Clear, can you explain what OR is, because your family/friends situation is almost as identical as mine.!

Would I kick her out?? I don't even want to go down that route...not yet anyway, but the long and short of it, yes I would. I couldn't allow them to drag me down as well. I would draw up a proper contract and go down the offical route, but I hope that it would never get that far.


Thanks for the replies and support,

Elliot

YorkshireBoy

elliot330 wrote:

...can you explain what OR is...

Official Receiver.

With the loan secured on the property, the loan company will have a "charge" on it. I'm no expert, but this would mean additional legal work presumably?

jonesMUFCforever

So you have an existing mortgage on the house you are living in now and a 75% mortgage on an old house which is rented out and you want to take a 3rd mortgage out to clear your mum's debts. Have I got that right?
Are you single or married + kids? Not being nosey just that unless you earn a telephone number salary how on earth will you pay everyone should things go belly up? ie your tenants stop paying the rent, your mum stops paying her rent and you go off work due to stress of paying all these mortgaes perhaps on a reduced salary!
Just being pessimistic here perhaps but these things happen.
Whatever you decide I wish you luck.
Eric

crystal_clear

elliot330 wrote:

My idea is to offer them £117k for the house, to clear their debt, and rent it back to them for whatever the cost of the mortgage interest is, which currently is about £490 and month. For Mortgage purposes, I would be telling the mortgage company that i've purchased it for £130k. Or is that not possible??

Crystal Clear, can you explain what OR is, because your family/friends situation is almost as identical as mine.!
Elliot

Hi again Elliot
An OR = official receiver
Also I think you can offer slightly below market value within reason but have to take on the mortgage for that you cannot buy at 117k and say you bought for 130k if your parents are going bankrupt as the OR will want to know when the money went ie the 13k difference it has to be accountable they will want evidence of sale and accounts for all monies in and out over a period of time plz read up on it more b4 you take this step just to make sure you doing all legally
yes you can buy the equity but it has to be at valuation
yes you can rent it to them no problem
no you cannot say you bought for more than you did
yes they have to account for all monies in and out

Like i say i am no expert but i have financial worries due to long term sick and i am looking for ways to save my home from any bankruptcy orders that may pop up in the near future...
Good luck hun hope you get it sorted

elona

Sorry to be negative - but if you do this for your parents - is there a chance they might think everything is solved and take out another loan or carry on spending?

Bendybops19

Oh elliot330 - i dont think its a good idea at all.

I know you want to help your mum out, but getting youself another mortgage...not a good idea. Even if you can afford it right now, but as ejones says, what if something in the future happens beyond your control and you cant afford it?

margaretclare

I agree - this sounds like an absolutely ba-a-a-d idea.

From personal past experience I'd say that these 'good ideas' to help out family, which result in you having bigger mortgage commitments than you want, are never a good idea.

Probably a good idea would be for your mum (and partner?) to sell up, clear their debts, and rent privately i.e. from a commercial landlord. She's trying to 'have her cake and eat it', by dreaming up an idea of 'selling' the house to you, renting it back, in effect shifting the burden on to you (as others have said, you'd have THREE mortgages!!!), she wouldn't have the hassle of moving and you'd have no evidence that she's had a 'lightbulb moment' and really wants to stay debt-free, nor would you have any way of influencing her to better spending habits.

I wouldn't touch it with the proverbial barge-pole!

Aunty Margaret