Buying my parents house - wise or?
Discussion
I'm just looking for some advice and ideas here as I'm considering buying my parents house, kind of.
My parents have a mortgage on the house they live in. I "lent" them a 30% deposit about 5 years ago (basically as a gift) for this purchase. Moving forward I'd like to look at buying their house outright, therefore they no longer have any mortgage. My parents would rather pay me the same amount per month than paying the bank (and I'm in a fortunate position to have the spare cash at the moment to do so). Few things to consider is that my parents would still technically own the house (in their name). I'm an only child, so for inheritance (and the will) the house would come back to me in years to come (unless they go crazy, change their wills an donate the estate to the Blackpool Donkey Foundation).
Few points/thoughts:-
1) ROI would probably make me more money per year than any savings account or ISA. There is currently about 100k remaining on the mortgage. They have also been overpaying the mortgage as well, so it's reduced nicely.
2) My parents are 15+ years off any form of retirement. So I'd expect at least 10 years of money/payment from them before it fizzles out. 10 years of monthly payment to me about see me breakeven on that 100k. Plus one would assume that the house price will go up...(one wishes).
3) I've encouraged them to increase pension contributions. Both currently work FT and both companies contribute 100% on their contributions.
4) I'd assume and accept when they retire, they'd live rent free (not a problem for me, I want to ensure they live well and comfortable without worry).
5) I appreciate this is not legally binding, but more of a personal agreement with my parents. I know there is some form of risk.
6) Is it worth clearing off the whole mortgage or leaving the account open with a small amount? Cheaper to do this than pay any deed transfer?
Thoughts welcome if this is a bad idea or not.
Thanks.
My parents have a mortgage on the house they live in. I "lent" them a 30% deposit about 5 years ago (basically as a gift) for this purchase. Moving forward I'd like to look at buying their house outright, therefore they no longer have any mortgage. My parents would rather pay me the same amount per month than paying the bank (and I'm in a fortunate position to have the spare cash at the moment to do so). Few things to consider is that my parents would still technically own the house (in their name). I'm an only child, so for inheritance (and the will) the house would come back to me in years to come (unless they go crazy, change their wills an donate the estate to the Blackpool Donkey Foundation).
Few points/thoughts:-
1) ROI would probably make me more money per year than any savings account or ISA. There is currently about 100k remaining on the mortgage. They have also been overpaying the mortgage as well, so it's reduced nicely.
2) My parents are 15+ years off any form of retirement. So I'd expect at least 10 years of money/payment from them before it fizzles out. 10 years of monthly payment to me about see me breakeven on that 100k. Plus one would assume that the house price will go up...(one wishes).
3) I've encouraged them to increase pension contributions. Both currently work FT and both companies contribute 100% on their contributions.
4) I'd assume and accept when they retire, they'd live rent free (not a problem for me, I want to ensure they live well and comfortable without worry).
5) I appreciate this is not legally binding, but more of a personal agreement with my parents. I know there is some form of risk.
6) Is it worth clearing off the whole mortgage or leaving the account open with a small amount? Cheaper to do this than pay any deed transfer?
Thoughts welcome if this is a bad idea or not.
Thanks.
Eric Mc said:
So - technically you are "gifting" to your parents the sum they need to clear their mortgage?
What's in it for you?
My parents pay me back over the next 10+ years. Plus if anything ever happened to them, I know they are going to be ok and not struggle.What's in it for you?
Again, it's just an idea....
So you're not buying your parents house, you're just giving them a loan, which you intend for them to use to pay off their mortgage (you'll need to check how much they can overpay without penalty, suspect you'll be firmly in penalty territory here with £100k outstanding), which they repay at a similar rate to their mortgage payments.
GingerChops said:
megaphone said:
You need to think about inheritance tax, if the house is still their property it will fall into their estate on death. What value is the house?
House is worth about 200k at the moment. So inheritance tax isn't an issue at today's limit of 325k. GingerChops said:
I'm an only child, so for inheritance (and the will) the house would come back to me in years to come (unless they go crazy, change their wills an donate the estate to the Blackpool Donkey Foundation).
What happens if they need nursing care and are told to sell 'their' house to pay for it?GingerChops said:
I'm just looking for some advice and ideas....
TBH the things you have set out in this thread sound a bit of a muddle, to say the least. I strongly recommend you and your folks find a solicitor to advise properly on the whole Inheritance Tax and property ownership area.Ozzie Osmond said:
GingerChops said:
I'm just looking for some advice and ideas....
TBH the things you have set out in this thread sound a bit of a muddle, to say the least. I strongly recommend you and your folks find a solicitor to advise properly on the whole Inheritance Tax and property ownership area.There are a number of unforeseen circumstances whereby your investment might be in danger of being at risk. If, for example one of your parents dies and the other remarries 'your' house might be passed to your step parent and then on to their inheritors, which might not include you.
Many years ago I gave my mum money so that she could buy her house and IIRC a Deed of Trust was drawn up protecting my wife and me from such an event. It no longer applies in my case as mum got 'promoted' 12 years ago and the property came to me and my wife.
If you can afford to do it, go on! It's a great feeling helping mum and dad.
Not quite sure whether you're proposing to buy the house and charge rent (you will pay tax on the rent) or lend them the money to pay off the mortgage. If the latter, and you charge interest, you will also pay tax on the interest. With the former, the house will not be part of you parents estate for IHT, but it would be part of yours. With the latter the house stays as part of your parent's estate.
If you're not looking to charge interest then you could organise it such that they pay you a monthly amount so that after e.g. 10 years you have the £100k back. Obviously your ROI is nil, but at least you have the money coming back to you over time. Your parents will have no mortgage interest to pay so you may benefit from them leaving a larger estate eventually! I'm sure you'd probably prefer that they spent it on enjoying retirement more. Alternatively, a simple loan agreement, charging no interest, with the capital repayable on the death of the second parent has some merit - the loan reduces the size of their estate for IHT and should also reduce their assets in any assessment for care costs in the future. Obviously the loan forms part of your estate for IHT but hopefully you will outlive your parents!
As above - take advice from a solicitor. Most can draw up a simple 1 or 2 page loan agreement if that is the route you go.
If you're not looking to charge interest then you could organise it such that they pay you a monthly amount so that after e.g. 10 years you have the £100k back. Obviously your ROI is nil, but at least you have the money coming back to you over time. Your parents will have no mortgage interest to pay so you may benefit from them leaving a larger estate eventually! I'm sure you'd probably prefer that they spent it on enjoying retirement more. Alternatively, a simple loan agreement, charging no interest, with the capital repayable on the death of the second parent has some merit - the loan reduces the size of their estate for IHT and should also reduce their assets in any assessment for care costs in the future. Obviously the loan forms part of your estate for IHT but hopefully you will outlive your parents!
As above - take advice from a solicitor. Most can draw up a simple 1 or 2 page loan agreement if that is the route you go.
recordman said:
There are a number of unforeseen circumstances whereby your investment might be in danger of being at risk. If, for example one of your parents dies and the other remarries 'your' house might be passed to your step parent and then on to their inheritors, which might not include you.
Or they decide to divorce, then the house might need to be sold, all sorts of things could happen from then on.One might think that one's parents are completely happy, but anything can happen, especially as people get to retirement.
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