Parents stake in house

Kurooi

Hi All,

So situation is as such, my brother lives with his parents, and not getting along perfectly well. Parents have grown desparate enough that now coming up to their retirement they want to purchase a 2nd home (Investment) half funded with cash half mortgage on their current (no mortgage) family home. As it is now, they will buy a property worth c.300k, own it and rent it out to him far below market value, but given they're only getting a 5 year mortgage the monthly repayments on that 150k will be massive. They are fairly financially savvy, but it alarmed me how thin they're spreading their finances for the next 5 years. That's how I got roped into this anyway, they came to me for advice, walked me through their finances and I told them in my opinion they can't make those repayments. I liked their idea of supporting him he's had some very bad luck I won't go into, I just think they can't afford to repay that 2nd house.

I thought of an alternative I haven't shared with them as I have no idea how it could work. The brother has a job, permanent contract in over a year, he could get a 25-30yr mortgage of maybe 120k plus some 20-30k savings I think he can pay his half, and they could pay their 150k cash. I think the reason they didn't go down that route is because they don't 100% trust him to just gift the money.

Is it possible for them to co-own the house, have just enough of a stake in it (their 150k cash) that they feel secure he can't go sell it and blow it away? He doesn't need their help to get the mortgage, in a way he needs a massive deposit help to buy it but they need some sort of ownership over it. They can't be on the mortgage as given their age the term would be down to 5 yrs in fact they might be declined too. Then within their own capacity they can arrange for him to buy them out in the future but tbh I think if this is possible they will take it, because they want him out of the house (and not on to the streets)

Any thoughts welcome :)

Ray Palmer

If they don't trust him there really isn't anything that will stop that. Legally you can sign things up but it doesn't stop somebody from breaking the agreement and causing trouble

Effectively you want him to buy half the parents property which is fine. If he takes out a mortgage to do this and they don't expect him to also pay rent it sounds financial viable for him. There are tax implications which need to be looked at but they can be avoided legally if you do it right. It is all a good idea but does require trust and agreement.

Would it bother you if he inherited more than you in the event of their death?

TheWonderLlama

A bank wouldn't lend to individual A on a property where someone else (Parents B&C) have an ownership stake. Its just not going to happen.

TheWonderLlama

Could they go guarantor up to a certain limit on the mortgage for the son? Just a thought.

Easier to just give him 5k to find somewhere to rent. Like paying on over-holder to leave:-)

Kurooi

https://www.boards.ie/discussion/comment/119305114#Comment_119305114

Nope I don't mind if he gets more, hell he can have all of it.

niallb

So in a nutshell your parents want to buy a second home so that they don't have to share a house with your brother? They're taking some risks to get to the point of owning their own home mortgage free - which they already have today. I'm not sure if I see any other way they benefit from these arrangements after 5 years. It's not much of an investment if they're renting it out way below market value and has tax implications if they do. Which of the two homes do they want to live in themselves?

If they were to write up a lifetime right to reside on the deeds of a new house he couldn't sell it without their permission. There is a chart somehwere on revenue with the value of that right which depends on their ages and that amount could balance out a gift of a deposit. Not sure how to make that work for everybody, but it might be worth looking at. You need to talk to a solicitor and account with an understanding of estate planning here!