buying property for parents

[aamaa]

I would like some advice regarding buying a house for my parents. My parents live in Surrey and we live in London. We cannot move out of London due to job/ school etc. My parents are getting old and want to move closer to us, which I think is a good idea. They have a mortgage free house worth about £400K. If they were to buy a house near us, they would beed at least £700k, so that would be £300k beyond their budget. They are retired and getting a mortgage in their name is impossible. My parents have asked us if we could get a joint mortgage so that I could take care of the mortgage which we are happy to do. Mortgage payment is not a problem for us. Our house is worth £800k and we have about £200k left on the mortgage. My husband and my job pays us well with an annual income before tax about £120k.

I am worried about the tax implication if we buy a second house with our parents. If we buy a 700k house, my parents will pay an upront amount of 400k, we can put 100k deposit and get mortgage for 200k. But does it mean we pay the stamp duty for second house for all 700k? Is it possible for my parents to pay stamp duty for their share of 400k (moving house stamp duty) and we pay the stamp duty for 300k ( second house rate)? Get two titles for the same property on a shared ownership property? I dont have any siblings so there wouldn't be any conflict with regard to inheritance. I just cannot think about paying second property stamp duty for the full 700k. Would love to hear from others and no judgment please 🙏🏻

You need advice from a solicitor on this. We put £30k into my pil house purchase with a deed of trust to protect it, but it's hardly the same thing as £300k and a mortgage.

I think it’s a bad idea not just for the tax implications of second home owning.

If anything ever happened to either of your jobs or health in these uncertain times your parents could lose their home.

You can get over 55/65 retirement homes in London for 400k. They may not be exactly what or where they would choose but at least they would be secure.

Which side of London are you? I’m in SW London and parts of Surrey are only about 20 mins drive.

@LadyGardenersQuestionTime

You need advice from a solicitor on this. We put £30k into my pil house purchase with a deed of trust to protect it, but it's hardly the same thing as £300k and a mortgage.

Did you put 30K cash or mortgage? If we had cash we would have gladly done it. But not sure how it works with mortgage.

Is there any scope in you extending the mortgage on your place then ring fencing that money as a gift to purchase your parents place outright?

Get legal advice.

I think the easiest is to remortgage your property to release the £300k. Then your parents buy the new property and are legal owners but then they create some form of trust for the £300k/beneficial interest in rhein property.

@TatianaBis

I think it’s a bad idea not just for the tax implications of second home owning.

If anything ever happened to either of your jobs or health in these uncertain times your parents could lose their home.

You can get over 55/65 retirement homes in London for 400k. They may not be exactly what or where they would choose but at least they would be secure.

Which side of London are you? I’m in SW London and parts of Surrey are only about 20 mins drive.

We are in Twickenham. God forbid if anything happens to us, we have a second house with equity over £200k saved for our son's secondary education ( he's only 3 at the moment). It's saved for if something happens to us, we could use it to get our main house mortgage free. My parents are not keen on retirement home and wants to be nearer to our son. It's a tricky situation.

@ExchangedCat

Is there any scope in you extending the mortgage on your place then ring fencing that money as a gift to purchase your parents place outright?

we have enough equity on our house. It's worth about £800k and we have an equity of £600k. So taking out £300k could be possible. But do banks allow us to use that amount to anything instead of investing it in the house? I've heard ppl release equity to purchase second property but not to gift it to other people. Is that even possible? If yes, that would be great for us.

I echo others. Get legal advice. The few hundred pounds that might cost you will be worth it.

@SeasonFinale

Get legal advice.

I think the easiest is to remortgage your property to release the £300k. Then your parents buy the new property and are legal owners but then they create some form of trust for the £300k/beneficial interest in rhein property.

So it's like gifting £300k to parents for purchasing their place. Do they have to pay capital gain tax for that?

@SpringLobelia

I echo others. Get legal advice. The few hundred pounds that might cost you will be worth it.

I agree. Would definitely talk to a solicitor. Thanks for your reply.

So your parents don’t want to live in Surrey, don’t want to live in a retirement property, won’t consider anything under 700k and expect you to fund it?!

I’d be having words about expectations frankly. They need to get realistic. And you need to get a bit more streetwise.

I wouldn’t personally jeopardise my kids’ education fund, and my parents wouldn’t ask me to. What if you have further children? If they have special needs etc?

Also 600k + 200k is not that much equity, particularly in London/SE. I think it’s way too tight financially.

Crackers. Can they find a cheaper property / area so they are still close but self funded? No way would I do this!

@TatianaBis

So your parents don’t want to live in Surrey, don’t want to live in a retirement property, won’t consider anything under 700k and expect you to fund it?!

I’d be having words about expectations frankly. They need to get realistic. And you need to get a bit more streetwise.

I wouldn’t personally jeopardise my kids’ education fund, and my parents wouldn’t ask me to. What if you have further children? If they have special needs etc?

Thanks for your reply but you make it sound like my parents are villians. No they are not. Having grown up around my grandparents, I know how much my childhood has been enriched by their presence. I want the same for my son. My parents took care of my grandparents and I want to do the same for them. I know many people are not able to take care of their aging parents, but it's a privilege for me. So please spare me your judgment.

OP definitely speak to a solicitor. If your parents needed residential care and had to pay, this has the potential to blow up in everyone’s face.

AIUI you would pay the 2nd property stamp duty on the whole amount as my friend was in this situation but reversed. A loan to your parents to be repaid when the property is sold could be an option although you'll need advice on this. I definitely wouldn't gift them the money because of inheritance tax implications. Have you thought about buying somewhere with an annexe or a larger property for all of you? Personally (our family finances are similar) I would be reluctant to say goodbye to that £300k or the equivalent monthly mortgage payments, which could be needed for for our children's future needs ir helping them get on the property ladder, risk of redundancy, the option of early retirement etc etc.

I said nothing about your parents being “villains” that’s entirely your own skewed interpretation.

You will have to take care of your parents anyway as they get old and frail. It’s not wise to compromise yourself financially so early in the day, when you may have to pay out significant care costs later on anyway.

Residential care homes or FT live in care is around at 50k pp pa in the SE. More if there are dementia or nursing needs etc.

You would be wise to talk to a retirement planning advisor.

This type of thing could possibly suit your parents, is pretty close to you, and for 2 bedrooms you'd only need to give them half the money, once they'd sold theirs, so far less risk for you:

www.mccarthyandstone.co.uk/retirement-properties-for-sale/beck-house-isleworth/

I meant half of £300k, so your remortgage would only be for £150k on top of their £400k.

How old are your parents?

What would happen if, say, one parent died and the other remarried? Are you protected from the new spouse inheriting your contribution to the property?