Help needed to buy my mum's house.

Tee_Jay

Hi - I really need some help/advice.
Mum has 8 years left on mortgage she is paying 5.69% fixed for another 3 years.
She is desperate to get out of house as was bought with abusive ex-partner and has nothing but bad memories there.
To finance mortgage she works two jobs and rarely gets time off. She is 60 this year and very worried about her future. I am concerned for her health.
Mum lives in Wolverhampton. I live in West London (renting), my sister is in Essex with hubby and kids. Mum just wants to move near us to help with childcare etc.
I suggested I buy her house morgage free - i.e. give mum £1000 per month for 8 years - totaling £96000 approx what house is worth today.
We then rent her house out and split the rent between us. this will offset my commitment and give mum additional funds.
She would still be liable for the morgage and would need to get a part time job in Essex to get by, plus my sister would pay her for childcare.

Any comments on legalities etc appreciated.

TJ

Fire_Fox

Why wouldn't you simply sell the house?

What are you going to do if you get made redundant/ partner gets pregnant unexpectedly/ fall ill or injured and cannot work? If the house is in your name all the rental income will be in your name and you will not be eligible for many means-tested benefits. Also if it appears on paper that your mother has signed the house over to you without the correct amount of money changing hands this may be deemed 'deprivation of capital' and your mum may not be eligible for many means-tested benefits or state care in her later years. You also need to look into the implications of income tax on the rent money and capital gains tax when the house is either transferred to your name or sold out of the family (or indeed both).

RAS

What is the penalty for early redemption?

And yes, sell the house and buy something smaller and cheaper if necessary.

Tee_Jay

Thanks for your comments...

The house was previously on the market for 6+ months with absolutely zero interest. The house will remain in mums name until I've paid full amount. I have very secure job, but would take out cover for loss of earnings etc. The market may have improved now, so selling again could be a better option. We are just keen to get mum out of her current situation of working so hard to pay for a house she loathes living in.
I am about to start saving for a deposit for my own property and intend to save £1000/month to reach £100k. As an alternative we thought to buy mum's house would be a good option as it does the following:
- Gets mum out of current situation immediately
- Allows mum to move to Epping and help my sister with childcare - meaning sister will save money and can return to working full-time.
- The property may be worth more than the £96k I will have paid for it in eight years time, resulting in me being in a better position.

We are at the stage where it seems like a good idea but none of us know the legal or financial implications.

Tee_Jay

RAS wrote: »

What is the penalty for early redemption?

And yes, sell the house and buy something smaller and cheaper if necessary.

The penalty for early redemption is approx £2600. I checked the mortgage tool on MSE and think she can get a better rate with HSBC.

She cannot get anything for the same price moving from Wolverhamption to Essex I'm afraid. The value of property between the two areas is such a big difference.

Fire_Fox

Tee_Jay wrote: »

Thanks for your comments...

The house was previously on the market for 6+ months with absolutely zero interest. The house will remain in mums name until I've paid full amount. I have very secure job, but would take out cover for loss of earnings etc. The market may have improved now, so selling again could be a better option. We are just keen to get mum out of her current situation of working so hard to pay for a house she loathes living in.
I am about to start saving for a deposit for my own property and intend to save £1000/month to reach £100k. As an alternative we thought to buy mum's house would be a good option as it does the following:
- Gets mum out of current situation immediately
- Allows mum to move to Epping and help my sister with childcare - meaning sister will save money and can return to working full-time.
- The property may be worth more than the £96k I will have paid for it in eight years time, resulting in me being in a better position.

We are at the stage where it seems like a good idea but none of us know the legal or financial implications.

If the house is not getting any interest it is overpriced, research at land registry sold prices for the street. Without meaning to be rude has your mum spring cleaned and decluttered the place, taking out excess furniture and putting away personal photographs? Are you willing to post the Rightmove link for comments?

If you pay the mortgage for the next eight years you are basically gifting your mum that money. Taking out cover for loss of earnings in the event of illness or injury is not a solution as the mortgage is not in your name so you will have to receive the insurance as cash. If you do that you will not be eligible for means tested state benefits as you will have rental coming in from your mum's house AND the insurance money.

When she retires your mum will not be entitled to any means-tested benefits as she will have to declare the substantial asset she does not live in. When she turns 68 your mum will then gift you (?and your sister) the house. If she then needs to go into a carehome the state will take a dim view of your mum's 'deprivation of capital' only a few years before. The state will refuse to pay for her care so you will have to ... You also don't know that you won't want to start a family/ second family before eight years have elapsed.

In summary it is rarely a good idea to combine your finances with family members, especially parents. Cut the price of the house and get shot of it.

getmore4less

How big is the mortgage?

What sort of rent will the place get?

Tee_Jay

Fire_Fox wrote: »

If the house is not getting any interest it is overpriced, research at land registry sold prices for the street. Without meaning to be rude has your mum spring cleaned and decluttered the place, taking out excess furniture and putting away personal photographs? Are you willing to post the Rightmove link for comments?

.

Since the property was last on the market, two years ago, I have redecorated the whole house, recarpeted and fitted a new bathroom suite. It is infinitely better now, and more saleable so maybe putting it back on the market is the best option all round. It's off the market now, due to no interest - which led to mum buying her ex-partner out, so I can't find any link I'm afraid.

I just spoke to mum and think we'll put the house back on the market to see if there is any improvement.

Tee_Jay

getmore4less wrote: »

How big is the mortgage?

What sort of rent will the place get?

Mum owes approx £56k over 8 years and pays about £650/month for it.
Renting would get around £550.

We're trying to find a solution that will keep the property in the family but I'm the only one who can help financially.

Fire_Fox

Why would you want to keep a property in the family that holds bad memories for your mum?

Tee_Jay

Thanks all - we've decided to try selling again and hope the improvements plus a slightly more optomistic market might help.
Fingers crossed.