Capital raising for parents

Posted on 16 August 2011 by Jon C


My parents (79 years old) are returning to the UK from France. They have approx £120k equity - not enough to buy a suitable property here. My brother and I (sole heirs) would like to help them by raising approx £50k each and buying a property for £220k. I have no mortgage and a £400k property, my brother is in a similar position. I am self employed IT contractor, he is a company director. Please can you suggest some options?

Many thanks

Jon

Depending on your personal circumstances there are several ways you may achieve this. 

Both you and your brother could capital raise on your own properties and give your parents the money to put down along with theirs for a cash purchase.  This might give them the flexibility to secure a discount on the purchase price if the vendor needs to move quickly or could give them the advantage if more than one party is interested in the property.  However, it could leave you and your brother with the mortgage debt and no stake in the property unless you take the appropriate legal advice.

You could join forces with your parents and buy a property in your four names and raise the new mortgage on the new property.  Lenders may have a problem with your parent's age, but as we would not be relying on their income I think we could get round this.  This would definitely give you a stake in the property and might even have some Capital Gains Tax advantages, but again you would need to take independent legal advice on this.

Finally, you could buy the property in yours and your brother's names as a home for dependent relatives.  This would mean both the title and the mortgage would just be in your names whilst your parents occupied the property.  Again you need to speak to a Solicitor about the pro's and con's of this approach.

However you decide to proceed, I believe we can help you and that you would benefit from speaking to one of our independent mortgage advisers.  Please call 0344 346 3672 and tell the consultant the date and title of your question, they will then be able to advise you on the best mortgage solution.  We can also refer you to our in house Solicitors, Rollingsons if you wish to take their advice.

Peter

Answers provided in response to Ask the experts are based on the information provided and do not constitute advice under the Financial Services & Markets Act. They reflect the personal views of the authors and do not necessarily represent the views, positions, strategies or opinions of John Charcol. All comments are made in good faith, and John Charcol will not accept liability for them.

We recommend you seek professional advice with regard to any of these topics where appropriate.

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