I'm Considering Asking Parents To Mortgage Their House To Help Me Buy

[arby1]

Good for you, it's nice to know some people can still trust each other!

It's also worth pointing out.. whatever option you decide on:

You can gift upto £3000 to both your father and mother each tax year (£6,000 first year as you can use last years allowance). This is completely tax free.

Thus if paying their mortgage or the "rent", tax implications will only apply to those amounts over £6k

Hope this helps

yes it does, thanks. I'm unlikely to go for this option due to associated hassle and just do it the 'normal way' instead, but it's good to know the ins and outs of all the possibilities. Is the £3000 limit also the same to any other individual in your extended family, ie, siblings, grandkids etc, or just between parent and child?

[jakeshaw]

yes it does, thanks. I'm unlikely to go for this option due to associated hassle and just do it the 'normal way' instead, but it's good to know the ins and outs of all the possibilities. Is the £3000 limit also the same to any other individual in your extended family, ie, siblings, grandkids etc, or just between parent and child?

No anyone.. could be a guy in the street

[Bloo Loo]

thanks for the cheery thought!

that one's easy though- if anything like that ever happened to someone in my family i'd happily sell everything i had to help them. I know my parents would do the same for me. So in this case the name on the mortgage would be irrelevant. This is just what family does for each other (in my opinion). I've done it before and i'd do it again.

you dont arf sound like a serial troll that posts on here.

[SHERWICK]

I'm always happy to lend my kids money to buy cars and stuff.

The rules are always the same, no interest, they treat it like any other loan and set up a monthly standing order.

Thankfully, they wouldn't dream of asking for money for something as daft as a deposit on a house in a falling market and if they did the answer would be no.

Don't cars depreciate faster than houses though?

[arby1]

you dont arf sound like a serial troll that posts on here.

there's many definitions of a troll, but working on the assumption that a troll is someone who fills a forum with pointless posts I'd estimate that you're 195 times the troll that I am. I could learn something from you I'm sure.

[Bloo Loo]

there's many definitions of a troll, but working on the assumption that a troll is someone who fills a forum with pointless posts I'd estimate that you're 195 times the troll that I am. I could learn something from you I'm sure.

pointless posts?....I would have been banned long ago.

now go rob the parents and help the house price rises....not that any of it is true.

[arby1]

pointless posts?....I would have been banned long ago.

now go rob the parents and help the house price rises....not that any of it is true.

wow, once you get a thought in your head you really can't let go of it can you? How can it help the house price rises when I've stated I'm waiting for a year or two and I can purchase the same house without going through with the option I'm discussing here?

[Bloo Loo]

wow, once you get a thought in your head you really can't let go of it can you? How can it help the house price rises when I've stated I'm waiting for a year or two and I can purchase the same house without going through with the option I'm discussing here?

you have no credit history, and yet you posted:

"However, from the 35% left over for ALL other expenses i've managed to scrape together enough that i could pay off my student loan."

[arby1]

you have no credit history, and yet you posted:

"However, from the 35% left over for ALL other expenses i've managed to scrape together enough that i could pay off my student loan."

yes, I think you'll find that a student loan does not count towards your credit history. I simply pay my 9% on everything i earn over 15k and in 10 years it will be paid off. So will you admit a mistake or not?

[okaycuckoo]

you're not quite right there, only one home would be at risk, my parents. 'My' house would be fully paid for wouldn't it? Now, I'm not saying that makes it better, but I did explicitly say that I didn't need to hear the arguments about dealing with family members as I know what they are and I know the eventualities.

Your parents could secure the loan (funded from their mortgage) against your property - they then become second mortgagees. They may even get a bailout from government in the end! Seriously, government home ownership support does extend to second charges in certain circumstances.

Security would put paid to the "eventualities" - puts their mind at ease and effectively stops you falling for the allure of MEW.

Visit land registry site for info on how to secure a loan against property. Maybe CAB could advise you for free.

[Bloo Loo]

yes, I think you'll find that a student loan does not count towards your credit history. I simply pay my 9% on everything i earn over 15k and in 10 years it will be paid off. So will you admit a mistake or not?

Not at all.

Ive had a look at some of your other contributions...you come across as someone with excellent financial knowledge.

you have a tendency to attack posters and refer to the site as a sort of slightly mad collective..giving itself a bad name as some posters make rash and sometimes silly comments. You have a view that you are right and an off the peg view must be wrong.

It seems odd therefore, that you would post up a quite apparently naieve OP, asking for comment, getting it, then berating posters who would voice an opinion that is very negative.

you then went on to suggest that you had to move on because of your rental hell.

so we have two troll like elements...first the obvious financial one of getting help from a third party, albeit with a novell twist, and second that renters are second class citizens and buying a house is what a sane person needs to do.

other aspects are the ultra friendliness to those expressing agreement. A good point made by one or two respondents was about any siblings...this was ignored at first, but would look to be a major problem in the future.

I suspect you knew all this already as I said earlier, your financial savvy has been evident in the past.

[Bruce Banner]

Don't cars depreciate faster than houses though?

Very true. I wouldn't lend money for a deposit on a car either.

The deposit is the lender's way of mitigating risk. The reason that lenders ask for large deposits is an attempt to ensure that the value of the asset is equal to, or greater than, the outstanding loan. If you can't afford the deposit, you can't afford the purchase.

[clloyd]

Have you done any research as to whether your parent securing a mortgage on their home will actually save you money, if so how much(i.e. what rate doing it yourself & what rate them doing it?) How long would you want to borrow over? Does this period take your parents over 65? Do THEY have the income to secure the mortgage?

Depending on the answers to these questions your scheme may never get of the ground. I dont see much point in this and if my brother asked my parents to do the same I would hope they would tell him politely where to go.

The two key posts you seemed to have ignored are that banks will want to know why your parents need to raise a mortgage and may not be happy to advance it so they can just give the money away and secondly the divorce issue. If you and your wife take a mortgage you are likely to lose out if you divorce but if your parents take it out you are going to get really screwed.

For IHT & Legal advice on this I suggest listening to people on here is not sufficient you are going to need to pay someone for advice. Personally I think you should put the idea out of your head but you have seemingly made your mind up this is the best approach so I doubt anyone here will persuade you otherwise.

Edited April 8, 2010 by clloyd

[arby1]

Not at all.

Ive had a look at some of your other contributions...you come across as someone with excellent financial knowledge.

you have a tendency to attack posters and refer to the site as a sort of slightly mad collective..giving itself a bad name as some posters make rash and sometimes silly comments. You have a view that you are right and an off the peg view must be wrong.

It seems odd therefore, that you would post up a quite apparently naieve OP, asking for comment, getting it, then berating posters who would voice an opinion that is very negative.

you then went on to suggest that you had to move on because of your rental hell.

so we have two troll like elements...first the obvious financial one of getting help from a third party, albeit with a novell twist, and second that renters are second class citizens and buying a house is what a sane person needs to do.

other aspects are the ultra friendliness to those expressing agreement. A good point made by one or two respondents was about any siblings...this was ignored at first, but would look to be a major problem in the future.

I suspect you knew all this already as I said earlier, your financial savvy has been evident in the past.

And 60 seconds ago I finished watching an episode of the mentalist!

Thank you for the compliment- I hope that I am reasonably financially aware. I also understand my relationship with my close family; that is why I specifically asked for comments that didn't resolve around these areas, rather around the areas that I'm not too sure on, such as tax/inheritance issues. The reason I use this site is that there are a lot of very intelligent people and I've got some useful information from this thread and the site in general over the years. Occasionally though the site does resort to mutual appreciation and back-slapping where the same mantra gets mindlessly trotted out over and over again (like the very first reply in this thread!), which is to be expected and I should learn to ignore it as the good points easily outweigh the bad. I was mulling the topic for this thread over for a while, and as you say, I know most of the financial side, but I thought it would be interesting to see what everyone on here thought. Also, I hadn't seen this question asked before and I thought it would be a change from the typical questions and I certainly got a generally negative response!

This is how I approach most situations though; I don't believe anyone should just follow the usual course of action without thinking things through for themselves. This is part of that process for me. I agree that it is a little off the wall with definite drawbacks- although it is something that I will continue to look at/refine before making any decision.

Anecdotally, I've been refused for the last two credit cards I've applied for (my current one has a small limit (£1500) as I previously mentioned). Their stated reasons were continued moving and very limited credit history. This does make me worry about obtaining a mortgage. When I asked them about my savings, they stated that savings have nothing to do with a credit check, which I knew, but it is amusing when the bank that holds your savings is turning you down as you're a risk!

I certainly don't view renters as second-class citizens. I continually argue to my friends that people need to question the british mind-set of property ownership. Currently it is my best option, however I know that ultimately I want a place that I can live in for 15+ years. If i could get a 5-10 year fixed rental I'd be happy with that, but we both know that isn't going to happen anytime soon.

[arby1]

but you have seemingly made your mind up this is the best approach so I doubt anyone here will persuade you otherwise.

no, actually the exact opposite. I've repeatedly said that I can see the downsides and risk in this approach, but I wanted a few questions answered and on the whole that's been done and i also wanted to hear the general consensus from the forum: and I certainly have done!

[arby1]

Your parents could secure the loan (funded from their mortgage) against your property - they then become second mortgagees. They may even get a bailout from government in the end! Seriously, government home ownership support does extend to second charges in certain circumstances.

Security would put paid to the "eventualities" - puts their mind at ease and effectively stops you falling for the allure of MEW.

Visit land registry site for info on how to secure a loan against property. Maybe CAB could advise you for free.

I'll admit I've never even heard of this, so I'll look into it, sounds like it's something worth understanding.

edit: sorry, I haven't worked out how to multi-quote yet!

Edited April 8, 2010 by arby1

[Bloo Loo]

And 60 seconds ago I finished watching an episode of the mentalist!

Thank you for the compliment- I hope that I am reasonably financially aware. I also understand my relationship with my close family; that is why I specifically asked for comments that didn't resolve around these areas, rather around the areas that I'm not too sure on, such as tax/inheritance issues. The reason I use this site is that there are a lot of very intelligent people and I've got some useful information from this thread and the site in general over the years. Occasionally though the site does resort to mutual appreciation and back-slapping where the same mantra gets mindlessly trotted out over and over again (like the very first reply in this thread!), which is to be expected and I should learn to ignore it as the good points easily outweigh the bad. I was mulling the topic for this thread over for a while, and as you say, I know most of the financial side, but I thought it would be interesting to see what everyone on here thought. Also, I hadn't seen this question asked before and I thought it would be a change from the typical questions and I certainly got a generally negative response!

This is how I approach most situations though; I don't believe anyone should just follow the usual course of action without thinking things through for themselves. This is part of that process for me. I agree that it is a little off the wall with definite drawbacks- although it is something that I will continue to look at/refine before making any decision.

Anecdotally, I've been refused for the last two credit cards I've applied for (my current one has a small limit (£1500) as I previously mentioned). Their stated reasons were continued moving and very limited credit history. This does make me worry about obtaining a mortgage. When I asked them about my savings, they stated that savings have nothing to do with a credit check, which I knew, but it is amusing when the bank that holds your savings is turning you down as you're a risk!

I certainly don't view renters as second-class citizens. I continually argue to my friends that people need to question the british mind-set of property ownership. Currently it is my best option, however I know that ultimately I want a place that I can live in for 15+ years. If i could get a 5-10 year fixed rental I'd be happy with that, but we both know that isn't going to happen anytime soon.

I suggest you vet your prospect rentals more carefully. find one that is long term. get a small loan from a credit union to get a credit line up.

try not to get a loan where your savings are held.

And yes, savings do count...thats why they give a better rate for LTV. Also, in recessions, bankers check what job you are in...whole industries are marked down for credit apps....eg..if you are an estate agent, if you work for a Close Company, a startup, financial services. A whole raft.

check your credit record with the Experian et al. put right any errors.

[Venger]

If you do borrow money and care from your parents make sure there is some form of contract drawn up.

A solicitor friend of mine has acted a couple of times for parents who've lent money to their children without a written agreement.

Once time with much of the parents' retirement money involved. The son had died suddenly and his wife didn't want to know them immediately after the death. From being so close to shutting them out. She found new love soon afterwards. She came to an agreement with the parents and their legal team before it reached court and they got nearly 2/3rds of their money back. They went through a lot of unnecessary stress.

Edited April 9, 2010 by friday

[xux42]

The son had died suddenly and his wife didn't want to know them immediately after the death. From being so close to shutting them out. She found new love soon afterwards. She came to an agreement with the parents and their legal team before it reached court and they got nearly 2/3rds of their money back. They went through a lot of unnecessary stress.

*Serious Mode Engaged*

Hell's bell's - you could argue that this forum is anti-women but on the other hand stories like this, if true, are revealing a savage self-interest in many women that's hard to accept/justify

I try really hard not to be sexist, but the behaviour of some women IRO of seizing assets and then digging in to hold on to them is pretty damning.

I really feel that the visibility of this behaviour on the internet will seriously undermine the chances that young men will ever commit to young women in the future.

[Saver]

*Serious Mode Engaged*

Hell's bell's - you could argue that this forum is anti-women but on the other hand stories like this, if true, are revealing a savage self-interest in many women that's hard to accept/justify

I try really hard not to be sexist, but the behaviour of some women IRO of seizing assets and then digging in to hold on to them is pretty damning.

Of all the couples I know that have broken up - every single time the women has dug in and got the house.

[lets get it right]

'Affording' it isn't a problem. I could afford to pay £200 for a bag of haribo this lunchtime, doesn't mean that it makes sense to do so, does it? I'm aiming to make the best financial decision I can. For a bit more background, my parents want to help and have offered some money towards a deposit (about 5%). I refused this as I don't want or need their help and I know they will need this money for retirement. They insist they would love to help, so I was thinking what I've proposed is an option(a higher-risk option, admittedly but one that could leave them in pocket). If they could provide my 'mortgage' and they could secure a deal that was better than I could do (which is very likely), then I'd be able to pay them more than their mortgage repayment was, while I still save money. This is a way of helping both parties financially.

I know they're not too worried about myself and my wife being able to repay them as our employment prospects are very secure. In my career I've applied for 5 jobs and received 4 of them. My wife has gone for 8 and received 7 offers (the last one was yesterday). I know that we are very lucky in this sense, and it's wrong to assume that this will always continue, but it does stand us in good stead.

What do you and your wife do for a living?

[lets get it right]

If you go ahead with the scheme - think of the position you put your parents in.

One day they own their own house, the next a bank owns a chunk of it.

Now consider this scenario - you get knocked over by a bus and die. So, first, you must have enough life insurance and set it up in such a way that your parents get enough to pay off your mortgage on their house.

Or this scenario. One of them gets ill - it can happen in an instant if they have a stroke - suddenly 24/7 care is needed. Say it's your Mum and your Dad starts developing dementia. And despite having a secure job you lose it. I know lots of people who thought they had a secure job until the day they found they hadn't.

The idea is nuts in my opinion. If your parents wanted to sell up, downsize and give you some cash that would be a different matter.

Funnily enough, it worked the other way around in my case. When my Dad died I and my eldest brother stood as guarantors (and paid half the mortgage each) to buy my Mum's council house - so she wouldn't have to worry about having a roof over her head as the council kept jacking the rent up.

I think when you're grown up, you should do something for your parents to repay them for everything they put in to bring you up. You shouldn't be a burden on them all their lives.

[arby1]

You say you are not interested in avoiding tax yet you keep mentioning it.

What is the difference between seeing if you can 'avoid paying tax' and 'understanding the tax implications'.

Whatever you find may well be legal or illegal. Whichever way, people need to pay tax or society fails to work.

If you can find a way of paying less, the people you ask for such advice on a forum like this would be up for more. Is this fair?

if you can't see there's a difference between 'understanding the tax implications' and 'avoid paying tax' then I have to seriously wonder about you. To understand something enable me to make an informed choice. You seem to think I should just blindly go through life not looking at any options.

[arby1]

You shouldn't be a burden on them all their lives.

It's safe to say that you have no idea about whether I'm a burden on my parents or not. Please read my posts in this thread. I have stated many times that I do not need to hear the argument you're making AS I ALREADY KNOW IT. I have stated repeatedly this is something I'm considering as one of many options as it has the potential to work out financially for both me and my parents. Obviously there is a risk involved and between my parents and I, we would together weight that risk against the benefits.

[Bloo Loo]

if you can't see there's a difference between 'understanding the tax implications' and 'avoid paying tax' then I have to seriously wonder about you. To understand something enable me to make an informed choice. You seem to think I should just blindly go through life not looking at any options.

its not your choice, there are 6 parties here at least.

you, the wife, the mum, the dad, the sister, the lender...at least...lets hope you impart all you glean to all parties....well, not the bank, they can go hang.