House purchase - can I help my parents?

[GelatoJoy]

First time poster- looking for advice or experience.

My parents are both in their mid 70’s and are keen to move from a house to a bungalow closer to where my family and I live. This is a return to my mums home (UK) country and somewhere they both love. However it is a more expensive part of the UK and consequently they are struggling to find somewhere they can afford to buy. Their ages and likely selling price of their property limits what they can afford/borrow.

Meanwhile, my DP and I currently rent - we sold our tiny flat when our children were born to accommodate us all. We now both earn fairly well and would love to get back on the property ladder, but don’t have a sufficient deposit. We have cleared debts however.

I haven’t discussed this with my parents, but I wondered if there might be a solution that would work for us all? Could I use my borrowing potential / available salary to help them afford a suitable property, and could some of their equity be used for us as a deposit?

I don’t have a financial background and have no idea if this is possible or even a good idea. I would want to make sure no one loses out and all protected financially should anything unexpectedly happen to any of us. Ideally I would like them to retain their quality of life, enjoy them being closer by, and if it was possible alongside that for my DP and I to own our own home again.

Does anyone have any experience or advice? Suggestions of things I should consider? Or even pointers to where I could get more specific advice about this (financial vs mortgage advisor?!)

For context I have a good relationship with my parents and my DP is happy that I’m investigating this option. Our finances are separate hence me discussing me specifically helping out, but we are very much a team. I earn more.

A mortgage on a house you don’t live in is buy to let. You would need to own it and rent it to your parents. What would you then do about a second mortgage? You would need one for your own property and this would be affected by your loan on your parents property.

This is not a good idea. Plus if they release capital, they can actually afford to downsize can’t they? I can see your way releases capital but it’s problematic. Plus I’m afraid not everyone can move to more expensive areas. They might just need to have something smaller or stay put.

This- it doesn’t really work.

Fair enough, thank you. Wanted to tease out my thinking before potentially speaking to my parents about it.

This would work if you bought one property for you all to live in, is that something you are considering? Or is your thinking that you purchase a property to rent to your parents, and you and your partner continue renting separately?

@BillyNoProblems I think they wanted capital released by parents and replace it with a mortgage on the parents smaller downsized property. So two properties. Two potential mortgages.

It possibly might work if you all jointly brought 2 properties, using your parents' money as the deposits and you each having a quarter share of both houses, with all of you on the mortgage agreements. You could ask a mortgage provider if that would work and if so how much you could borrow. The amount might be less if your parents don't have much reliable income. However, it could be difficult if one or more of you needed to sell up for any reason.

Thank you, some interesting ideas to mull over.

Would your parents consider using their capital to rent instead so they can live in the kind of house they’d like? The risk depends on their income and the likelihood of one or the other needing care. As they’re mid 70s they need to think of the next 20 years; would they even want to move country again?
If you want to buy yourselves then I wouldn’t want to get involved in owning part of their home but maybe you could help them later?

@AnotherDayAnotherDog That means CGT would be liable if the second property is sold. If it makes a gain of course. Both would have second houses!

I was in a different but similar situation. In that my parents and my sibling and I bought a property, their deposit, our mortgage, so the house was technically ours.

When I wanted to move in with a partner, we had the borrowing capacity, but needed a lot more in terms of stamp duty as it was a second propriety

When the house was sold, the equity was used to pay for my parents downsize, but that meant that we also had to pay capital gains tax on a money I wasn’t seeing any of!

When the house did sell, it meant my partner and I were able to upsize as stamp duty wasn’t extortionate!

It did work for us, but not sure I really knew what the repercussions were when we bought the house!

Could you all go in together and buy a house with a separate annex?
Not sure how that would work if one or both parents needed care though ?
Maybe if the property was just in your name @GelatoJoy

Good point. I just can't think of a way of doing then, except everyone living together which opens yet more cans of works.

Suggest

Your parents sell up with intention of downsizing

You buy a property together

The parents live downstairs, bedroom, bathroom, lounge

Your family lives upstairs with bedroom, bathroom, possibly lounge

Shared kitchen

Shared garden

Huge hanks all, lots to think about. Not sure living together would work but I posted on here for diverse views and suggestions and appreciate all the responses. I’ll maybe have a browse of any properties with an annex, suss out prices etc

Your parents could also look at properties that are classed as "age over 55 or over 60" second hand properties are usually cheaper prices than new ones.

Property up north in UK is cheaper than South

A single person can normally only borrow 3xtheir salary
This is the advice that I had from a Financial advisor, even with a huge deposit (sale of a property)

A broker may lend more

We changed what property we were looking at & bought something much cheaper.

Suggest expand the area that you are looking at
Reassess the budget

Probably not for your parents, but other ideas outside the box

Move to a cheaper country

Live on a cruiseship

Live on a canal boat

Live in a motorhome

Live in a Travelodge

Live in a Tiny home

I think they will have to stay fairly local to where they currently are. They are in a much more affordable part of the UK than I am (their current 4 bed house is about half the value of the 2 bed flat we rent and it’s not fancy, but is well located). We’ve no intention of leaving the area we are in though, and my parents aren’t looking to live here, just closer by. But selling up and downsizing is proving difficult for them (ie within an hour of where we live). Hence me wondering if I could boost their spending power a bit.

I do love the idea of living on a cruise ship however. How can I make that happen? Perhaps I could teams into work?! Less cooking. Nice views…. 😉

Have they looked att flats & over 55 flats ?

Okay. This might seem complicated. Are you and your partner going for a mortgage together? What’s the maximum you could borrow? Let’s say the maximum you could borrow is £300,000 would you be able to buy 2 properties with that? Especially if you had some capital (from the sale of your parents home) for a deposit. If yes then:

your parents sell and use some capital as deposit for you house. You buy with a joint mortgage with your partner.

your parents use the rest of the capital they have as a deposit for their house. They pay for the rest with a mortgage taken as a “joint borrower, sole proprietor” mortgage. As JBSP mortgage means you are effectively guarantor and if they can’t pay, you are liable but they are the only home owner

could that work?

Interesting- I’ve not heard of a joint borrower, sole proprietor mortgage. Will need to investigate. Thanks.

@CaptainSevenofNine£300,000 goes nowhere in an expensive area. I’m SE, 40 miles from London and this sum would buy a tiny 2 bed terrace. Nowhere near 2 houses in the area the op is in one assumes.

Do people in their mid 70s qualify for mortgages? How do they pay it back over a short term? It’s not sensible or feasible.

I don’t know area, I don’t know borrowing potential. My example was just that. The OPs situation might be vastly different, plus it seems there is money to be used as a deposit. It may be possible.

crucially it won’t really be the parents that are on the hook for the mortgage, therefore their ages won’t matter. The person on the hook will be the OP and partner.

If the parents can afford a deposit and have some funds to pay the mortgage (it’ll probably be cheaper than private rent) this JBSP mortgage is a serious option…all depending on the figures. Get a mortgage broker who is experienced with JBSP mortgages. We have one with our DS and it was complicated to set up, but worth it.

There are potential options- get a good mortgage broker who will talk it through with you and see what can be done. You will need legal and tax advice on top but the mortgage adviser will help to begin with

Thank you- you’ve all given me a lot to think about / investigate. Definitely needs careful consideration and informed advice. It has been helpful to hear different perspectives.