Financial advice please
I'm trying to buy a house between £175K-£200K
What would be cheaper to do?
I will be paying a £24000 deposit.
Would it be easier to pay the mortgage for the new house OR my parents don't mind me remortgaging 30% of their house which would be £200K and I just pay their mortgage back whilst I can own my own house.
Anyone have any advice? I also read something like it can be cheaper to buy a new house if I already own a house, my parents house is on my name. How will this make it cheaper?
What would be cheaper to do?
I will be paying a £24000 deposit.
Would it be easier to pay the mortgage for the new house OR my parents don't mind me remortgaging 30% of their house which would be £200K and I just pay their mortgage back whilst I can own my own house.
Anyone have any advice? I also read something like it can be cheaper to buy a new house if I already own a house, my parents house is on my name. How will this make it cheaper?
Moved to Money & Finance
Original post by Anonymous
I'm trying to buy a house between £175K-£200K
What would be cheaper to do?
I will be paying a £24000 deposit.
Would it be easier to pay the mortgage for the new house OR my parents don't mind me remortgaging 30% of their house which would be £200K and I just pay their mortgage back whilst I can own my own house.
Anyone have any advice? I also read something like it can be cheaper to buy a new house if I already own a house, my parents house is on my name. How will this make it cheaper?
What would be cheaper to do?
I will be paying a £24000 deposit.
Would it be easier to pay the mortgage for the new house OR my parents don't mind me remortgaging 30% of their house which would be £200K and I just pay their mortgage back whilst I can own my own house.
Anyone have any advice? I also read something like it can be cheaper to buy a new house if I already own a house, my parents house is on my name. How will this make it cheaper?
Your best bet would be for you, and your parents, to discuss this with a financial advisor. They can advise you much better than people on a discussion board for students.
If your parents want to remortgage and give you the money to buy your own house, then that's their decision to make. They'll need to show the mortgage lender that they have the required income to support the mortgage repayments, i.e. that they can afford the loan. This might include them needing to show that they could afford the repayments from their own income (for example, if you stop paying your parents).
If your parents own their own home outright (i.e. they have no mortgage) they may be able to get a better interest rate than you, as they'll have a lower loan-to-value figure.
If you take this approach, I would strongly advise both you and your parents to put your agreement in writing. You don't want any issues in the future if people start mis-remembering exactly what was agreed years earlier. You might want to get legal advice on this.
No idea on the last question in your post. The government have sometimes had schemes to make things cheaper for first-time buyers (i.e. by reducing/waiving stamp duty on their purchase) but I don't know what (if anything) is currently available.
Original post by martin7
If you take this approach, I would strongly advise both you and your parents to put your agreement in writing. You don't want any issues in the future if people start mis-remembering exactly what was agreed years earlier. You might want to get legal advice on this.
I agree with everything Martin has said, especially this.
Regardless of how close you are as a family make sure you have a formal agreement in writing. What might seem like trivial issues at the moment (eg; who is on the title deeds, equity allocation to parties on sale, transfer of ownership terms, liabilities, etc) can end up being a nightmare years down the line.
Some other things to bear in mind...
Are your parents genuinely in a position to remortgage for such a large sum at their age? Many banks are reluctant to lend to give long mortgage terms (ie; 15+ years) to people 50+ because of the risk of them being unable to make repayments in retirement. Can you/they afford to repay such a mortgage over the short term?
Have you sought tax advice? On paper your parents will be the legal owners to "your" property, when ownership is transferred to you, you may be liable for a significant capital gains tax bill. Similarly should one or both of your parents die before the transfer of ownership (unlikely but not impossible) it could be included within your parent's estate and may be subject to inheritance tax. In both instances the burden would be on you to prove that some or all of the equity in the property is yours but this will take time and money.
What if your parents disagree with your life choices in the future, whether that be choice of partner, career or "extracurricular activities" and refuse to sign over ownership? It helps if you already have a legal agreement RE transfer of ownership, but again, it could take a lot of time and money to get your money back.
I personally would save the hassle, and buy a more modest property myself while taking advantage of existing schemes to help first time buyers (eg; Help to Buy ISA). OK it may cost you more from a mortgage interest perspective but you can disregard the myriad of issues discussed above and preserve a good relationship with your parents.
*****Talking from personal experience - issues like these can lead to family feuds that cost all parties massive amounts of money, time and upset. Do not go into this without professional legal and financial advice.*****
Original post by ch0c0h01ic
*****Talking from personal experience - issues like these can lead to family feuds that cost all parties massive amounts of money, time and upset. Do not go into this without professional legal and financial advice.*****
This cannot be overstated. Nothing builds up a family feud like money does.
Original post by ch0c0h01ic
Have you sought tax advice? On paper your parents will be the legal owners to "your" property, when ownership is transferred to you, you may be liable for a significant capital gains tax bill. Similarly should one or both of your parents die before the transfer of ownership (unlikely but not impossible) it could be included within your parent's estate and may be subject to inheritance tax. In both instances the burden would be on you to prove that some or all of the equity in the property is yours but this will take time and money.
If the parents have lent OP money, and OP uses that money to buy a house, I can't see why the parents' names would need to be on the deeds as owners. (The analogy is the same as with a mortgage lender -- they are not registered as the owner (or part-owner) of my house; the owners are me and my partner. The lender has a legal charge on the house, so that if I default on the mortgage their financial interest is protected; but the lender isn't a legal owner.
That's not to say that tax advice is a bad idea -- it's possible that when OP makes his/her loan repayments to his/her parents, anything that counts as interest may count as taxable income for the parents.
Having a written agreement, and making the required repayments, is likely to make it clear that this is to be counted as a loan and not as a gift. There would be inheritance tax implications if the taxman sees the transaction as a gift and the parents die within seven years.
One thing I didn't make clear originally -- if your parents are reliant on you paying them to allow them to repay their mortgage, then if you suddenly can't make the repayments, they are at risk of losing their home.
Original post by martin7
If the parents have lent OP money, and OP uses that money to buy a house, I can't see why the parents' names would need to be on the deeds as owners. (The analogy is the same as with a mortgage lender -- they are not registered as the owner (or part-owner) of my house; the owners are me and my partner. The lender has a legal charge on the house, so that if I default on the mortgage their financial interest is protected; but the lender isn't a legal owner.
I was commenting on the OP's idea of his parents remortgaging their house and using that capital to buy their son/daughter a house, and the the son/daughter then repaying their parents. In that instance the parents will be viewed as the home buyer/owner.
You're describing something slightly different (ie; parents remortgage and loan/gift funds to child, who then purchases property in their own name). Whether this money is "gifted" or loaned could still have significant implications.
The issue of parents loaning money formally could also influence many mortgage providers willingness to lend. If much of the deposit is in fact a loan (parental or otherwise) then the mortgage provider is exposed to greater risk, especially when they aren't the sole creditor in the event of default. Many will require formal assurances that the money isn't a loan but a "gift" and that said parties will cease to have any interest or claim to the property in the event of default.
...Like we've agreed already, they need formal legal advice. This is beyond the expertise of the people commenting here.
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