Taking on mum's mortgage...???

molezak

Hi there, I'm looking for some advice regarding a mortgage transfer before we take things further and speak to the banks etc. Plans are only basic at the moment, no formal discussions have taken place as yet... just looking for advice...

The facts are...

• My mum has a mortgage for her ex-council house of which there is not much left to pay (bought off the council for a lot less than what it is worth now).
• Myself and my hubby are wanting to take on mum's mortgage as we wouldn't be able to get a mortgage for the value of the house now.
• Me & hubby do not need to live in house as we lived in tied accomodation with hubby's job.
• In our heads, our basic ideal situation would be for us to take on the mortgage and put the house in our names and mum (who is single) stay on in the house rent free for the duration of her life if she was happy to do so. If we wished to sell the house during her lifetime she would get a %.
• The house needs quite a lot of modernising

Does this sound possible & legally feasible?

Thanks

poppysarah

You need a solic to give you the low down. Sounds possible - probably some sort of trust deed needs to be done for your mum. How much is left on mortgage? (Don't take out shed loads of cash when you get a loan/mortgage to do it up - do it bit by bit slowly and you'll save shed loads)

I think you'd need a gas cert for the property and maybe an energy performance cert too. But easy enough.

MarkyMarkD

Hi molezak and welcome to MSE.


I would forget about "taking on mum's mortgage", at least in regard to taking on the whole mortgage. It will probably be more straightforward for you to agree to buy the property at a suitably discounted price and get a mortgage from wherever you can get the best deal - which is very likely not to be where your Mum's mortgage is.

Of course, if your Mum's mortgage is so small that it's below the minimum £25k or £50k that many lenders will lend, things may be more restrictive. As you haven't mentioned any figures, it's hard to guess.

An alternative approach would be for you to get yourselves added to the mortgage along with your Mum, and added to the deeds too. That should be relatively straightforward. Effectively she would be giving you and your husband a share in the property. Because you wouldn't be charging her rent, it wouldn't cause you any income tax issues.


Inheritance tax is a problem for all of this. If your mother doesn't survive for 7 years after giving you assets (whether selling you the house at an under-value, or simply giving you a share of the property as per my second option) then the value of what she's given you will be subject to inheritance tax. But I'm assuming that her total estate is less than the IHT limit and hence this point is probably an academic one.


The first of my options would probably require you to have a deposit for the mortgage, although lenders may treat the equity in the property as sufficient. The second option wouldn't need you to have a deposit as it would simply be a transfer of equity.


There are lots of issues to consider. I think that something will be feasible, but you ought to speak to a sensible financial adviser before leaping into this.


Regarding poppysarah's point (which was posted whilst I was typing this) it's a good point. I would suggest that, if you take the first route, you take out a flexible mortgage product which allows limit-less overpayments and drawdowns. Then borrow the total amount you expect to need (including the renovations) and pay back anything you don't need on the day of completion, to draw down in stages.

If you take the second route, then you'll have to ask the lender if they will be OK with further advances to cover renovations at a later stage, after the transfer of equity (or at the same time, if the mortgage she currently has is flexible). But the chances are that the rate on such a further advance will not be competitive, so it may be better to get a new mortgage for the whole lot elsewhere.

molezak

My husband had thought along the lines of the second option MarkymarkD suggested and i think that is what we will probably look in to doing as there is less than 30k left to pay. If we did this when the mortgage was paid off would we be able to take my mum off the deeds or would we by law have to pay her something for her share?

MarkyMarkD

She can gift you her share for nothing, if she wants to do so. There's no legal requirement to pay her anything.

There might be stamp duty issues involved in the transfer but it depends on the value of the property among other things.

poppysarah

I would say re "it needs a lot of work" - your mum lives there now and ok electrics and gas are important to have properly working (So I hope they are currently safe) but all the rest is vanity.

The money saving way is to do things as you can afford them. Do the sums about how much you will save by taking a smaller loan or mortgage and you'll see it makes sense. Once you've paid off the mortgage you can save that amount every month still and have the money to do bigger things more quickly.