# Elderly couple and house purchase , is guarantor an option?



## silvamuppet (1 Oct 2012)

Hi

Just wanted to bounce a scenario to see if anyone is aware of a way around a certain situation.

An elderly couple i know (in early 70s so both retired with pensions and doing some part time work) have been renting for the last 40 years at this point. But as a result of recent incidents they now no longer feel secure in this place and it may not be available as an abode for them. (all kids since moved out so they are there on their own).

THey wish to purchase a house (or apt) of their own. They have a decent cash sum available on teh back of a sale of an asset combined with their own savings. 

We're wondering how they could finance the purchase of a house of their own with the liklihood of a purchase price between 180to 220K being able to provide about 120K of their own.
Will a bank touch them with one (or multiple) of their children prepared to go guarantor??

There is no real issue with their capacity to repay whatever they borrow (as the likely amounts wouldn't be do dissimiliar from their rent...which is low). Obviously this assumes (from a morbid point of view) they are still with us for the term of the loan. But with such a high LTV, there is an expectation of those prepared to go guarantor that nobody would end up out of pocket over it!

THere is another , but less desired, approach where one family member may be able to provide the loan from their own house deposit (saving for quite some time) but it would mean them having to take out a bigger loan than they'd like when they decide to buy. So its not preferable.

Really just looking to see if people have ideas on this kind of financing?

THanks


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## Bronte (1 Oct 2012)

Why would they not go and rent somewhere better?  Using the capital as part subsidy to the rent if necessary.


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## silvamuppet (1 Oct 2012)

They could.
At this point we're exploring options TBH.

There is an element of security. THey kind of want their own place , and somewhere they can feel is theirs. You could certainly argue that the lump sum could subsidise renting. But we wouldn't be able to ensure that the place they find they'll be able to rent for the next 20 years (at the far end of the likely timeframe)

Also an element of legacy i suspect (they would like to leave an inheritence of some sort behind).

Nothing decided yet, so just looking to see what is available to them as an option.


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## wbbs (1 Oct 2012)

I would be inclined to think not a hope, even in the boom times a loan like that would have been hard enough to get over the line.   What about a credit union, do they have an account with one, they are more likely to be amenable to an unusual proposal like this if there is sufficient surplus income from the children to service the loan.


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## silvamuppet (2 Oct 2012)

THanks guys.
Yeah it is a long shot at their age alright to get anything out of the banks. I think the banks are still pushing to get their Loan To Deposits ratios down, so even if they were much younger i suspect the banks would try and stall.

Credit union is an option alright possibly combined with what the children can pull together. Certainly worth the conversation to see if anything can be entertained.


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## Bronte (2 Oct 2012)

silvamuppet said:


> Credit union is an option alright possibly combined with what the children can pull together.


 
Why make life complicated getting others involved in one's financial affairs.  Credit unions are also tough on lending, and their interest rates are worse than banks.


Surely with 120K they can find something to buy with cash.  A two bed house or apartment can easily be found for 120K.  What part of the country are they looking in, county and town or is it Dublin?


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## silvamuppet (2 Oct 2012)

Bronte

Preferance is close to where they currently are. Unfortunatly its southside dublin. 

I guess you could argue that beggars can't be choosers, but the rationale is that the further away they move from the rest of the family the harder it will be to do the little things like drop in in passing, check up on them etc. (which will be more important as the next few years go by most likely). These things would still happen but would by necessity be less frequent i suspect...as is people can drop in on way to and from doing stuff easily enough....if they were further away it would be an actual planned visit kind of thing.

To be fair there are houses and apartments in the area that aren't a million miles from that price range and are certainly on the radar as an option. Pulling together a plan at the moment and want to make sure i've all options on the table.

Thanks.


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## Bronte (2 Oct 2012)

What rent are they currently paying, what size of house do they want and would an apartment be better, as in more secure, one that has a concierge etc.

In relation to a legacy, they should concentrate on their own retirement, often in these scenarious one finds that it is those who would benefit from a legacy that thwart the right decision, not saying this is happening here but it's something elderly people need to watch out for.


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## silvamuppet (2 Oct 2012)

Not sure of the specifics of their current rent but it is quite low. (they've been there for a very long time and have a long standing arrangement ... however that arrangement is about to get tricky with the house likely to be contested in some form when the landlady passes away...she's very old)...also its recently become prone to floods (apartmens that have gone up nearby have resulted in natural drainage disappering and all the runoff goes into the house in very high rains  ). They're tired of shoring up doors and replacing carpets etc and can't get insurance anymore because of it.

I agree with you on the legacy end of things. None of the children are in dire straits or anything or putting pressure on , to my knowledge. So this side of things more comes from the couple themselves. And they've been advised to sort themselves out first.

Size of place wouldn't need to be large, 2 bed really i think would do. Good point about the concierge bit. Reason we've been focused on house is due to the reduced liklihood of having young partying type neighbours above and below plus the presence of a garden (like to have the herbs and flowers etc to tend).
At this point i'm pretty sure not a single institution will go near them at their age profile. So only real option is to find a place in their current range or close to (and allow family to chip in to get them over the line)


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## terrysgirl33 (4 Oct 2012)

Are any of their children in a position to buy a house with a granny flat attached, or to buy a house with space to build a granny flat?  It would probably mean no inheritance left for the other children (presuming the parents pay the extra price for the larger house) but would give them a place to live for their lifetime.


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## silvamuppet (4 Oct 2012)

@terrysgirl33, yes and it is something we're actively persuing at the moment.

One child is in a position to give a cash loan but TBH, it comes out of their own house deposit, so focus is to avoid that (for their sake).
ANother however is young, debt free and in no position to get a mortgage in the near to medium term (ie could never afford a full one on her own and not in a position where she is likely to want to).

Looking like she may be in a posiition to get a mortgage (in just her own name) but with teh folks going jointly on the deeds and providing the capital such that the LTV is about 40% (Max). 
It might get more complicated than this as in reality her parents will be paying the loan , so she's just standing over it if you know what i mean.
Certainly there are inheritence issues in play here which would have to be addressed. 
Main thing though is to get the 2 guys settled in somewhere they are comfortable in and where rest of family can be near to!


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## wbbs (4 Oct 2012)

Not that simple to get a mortgage where you want to put other people on the deeds, usually works the other way around, you must have all the names on the mortgage and can put just one on the deeds.


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## silvamuppet (4 Oct 2012)

wbbs, even if the other parties (not on the mortgage) are providing far more capital than the lending institution?


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## wbbs (4 Oct 2012)

Yes, bank has first call on the house, that's the point of their mortgage, you can't really give other people a share of something you don't fully own.   Most banks see it this way anyway.


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## terrysgirl33 (4 Oct 2012)

If she is young and single, is she ready to take on buying a house and settling on an area to settle down in?  I don't know, just asking the question!  In my head, it's a more suitable set up when you are talking about a fairly settled family (in that they want to stay in an area because their children are in school, etc. etc.) sharing a house with the parents.

You would need to go over several scenarios to make sure that all parties understand what will happen if something changes.

This describes a bad situation:
http://www.askaboutmoney.com/showthread.php?t=67142


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