Capital raising on parent's home

Posted on 6 June 2011 by Howard Phillis


I would like to borrow some money secured on my parents house (which they own outright) to use as a deposit for a mortgage. Would the loan for the deposit be taken in my name or their name. Would the fact that they are both retired make it difficult to get a loan in their name? Could I act as a guarantor for the loan. I deally I would like some form of PPI on this loan if it was in my name to protect the interests of my parents. Is this possible?

Howard

Any borrowing secured on your parent's house will have to be in their names. There are some lenders will also allow you to be named as an additional party on the loan, but this will not affect the property title.

Lenders will want to be sure that your parents are not being coerced into borrowing and whilst you may be able to either guarantee or be named as a joint borrower, their ages will make it difficult for you to raise a loan.  The usual requirement is that any mortgage is repaid by the age of 75 and that your parents must be able to afford the mortgage based on their pension incomes.

I don't know if you have any brothers or sisters, but any borrowing on your parents home could adversely affect their estate should they die during the mortgage term.  For this reason I recommend that you discuss your proposals with all your family and that your parents take independent legal advice before entering into any loan agreement.

I believe we can help you find the best way to achieve what you want 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 offer you further advice and also talk to you about PPI insurance..

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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