Mums House signed to me, what next?

t0mbop

Hi guys,

Me and my parter currently live in rented accomodation, but my Mum has kindly suggested to sign her little mortgage-free terraced house over to me, on the basis that she still lives in it and uses it as her house.

There are a couple of reasons for this involving previous family disputes over wills and such like but another point she raised is because we have very little facility to save and to be perfectly honest are impatient, it might help in some way to obtain our first bought house together.

I've spoke to some guys at work who are quite financially aware, and the general rule of thumb is that yes it can be used in some way. My boss said what he would do would be to borrow a large amount against the property, interest only, and pay that. In turn that would allow you to use that as a deposit on our own place, making the mortgage smaller which he advised to be capital repayment. He seems to think that an interest only borrowing on my Mum's place, plus a smaller mortgage on our place combined would be less than probably the 90% LTV mortgage we'd have as a first time buyer, when we can eventually afford it.

I'm not very clued up on this sort of thing I just wondered what peoples ideas were and how I can play the system (not in a fraudulent way obviously) but any tips or tricks I can use as Wednesday we meet the solicitor to transfer the house. I'm also not sure how this works buy my Mum's looking after that side of things.

Any help is appreciated!

Cheers.

BoGoF

Oh dear, a whole can of worms opened here....I wouldnt be worrying about how you can use this to secure another place but things like possible Capital Gains tax on the transfer, Inheritance tax issues.

Before the deal is done I would be speaking to the Solicitor about how the transfer affects your mother regarding the above.

muskoka

as above poster states, you are opening a whole can of worms on this regarding tax liabilities. Be very, very careful and take professional advice

t0mbop

This is it, it's going to be a Q&A session at the solicitors too, because neither of us can afford silly fees and needless charges.

If it doesn't benefit then it won't be done. What's sparked it is people constantly telling me, "Now's the time to buy, house prices are low, get in there!" and I think they have a point, but we can't. Yes we might have to wait, that's a real possibility and we're saving as we speak.

But, Mum's house is mortgage free and she's trying to help. That said, if the worst happened with jobs and finances, I'd rather lose my rented house than her home because I'd been foolish.

The solicitor will be quizzed in depth about possible pitfalls and red tape. It's not a fraudulent excersize it's my Mum trying to help in about the only way she can! Some parents can lend their children deposits and such like. My Mum has very little, just enough to get her by so it's a possible solution.

We're not sponging and looking for an easy ride, but as a young couple looking to get on the first rung of the property ladder, which is extremely difficult, you'd explore avenue too!

Cheers

VIGILANT22

[QUOTE=t0mbop



There are a couple of reasons for this involving previous family disputes over wills and such like but another point she raised is because we have very little facility to save and to be perfectly honest are impatient, it might help in some way to obtain our first bought house together.

I've spoke to some guys at work who are quite financially aware, and the general rule of thumb is that yes it can be used in some way. My boss said what he would do would be to borrow a large amount against the property, interest only, and pay that. In turn that would allow you to use that as a deposit on our own place, making the mortgage smaller which he advised to be capital repayment. He seems to think that an interest only borrowing on my Mum's place, plus a smaller mortgage on our place combined would be less than probably the 90% LTV mortgage we'd have as a first time buyer, when we can eventually afford it.

I'm not very clued up on this sort of thing I just wondered what peoples ideas were and how I can play the system (not in a fraudulent way obviously) but any tips or tricks I can use as Wednesday we meet the solicitor to transfer the house. I'm also not sure how this works buy my Mum's looking after that side of things.

Any help is appreciated!

Cheers.[/QUOTE]

quote: I've spoke to some guys at work who are quite financially aware
!!! No I don't think they are including your boss.

As both posters have said you require qualified advice. This decision can affect your mother greatly in the future...read Help the Aged & Age Concern websites and you will see upteen case with problems like this.

ie I she signing over to you and your partner? If so and your relationship fails your partner can also claim on the signed over house!!..where would that leave your mother? What would happen if one of you became bankrupt, it is happening all the time to people who thot it would never happen!

Also her future claim to any benefits can be affected.
But most importantly, you need to read this:
http://www.ageconcern.org.uk/AgeConcern/Documents/FS40Deprivation_of_assets_in_the_means_test_for_care_home_provision.pdf

To be perfectly honest reading quote: we have very little facility to save and to be perfectly honest are impatient.
Impatience is not a good enough reason to put your mother at risk!

I am staggered at the "things" people do in a DIY way, on the cheap, without proper advice...the only advice being the guys at work, boss, bloke down the pub!....rolls eyes...

BoGoF

Just make sure you take specialist advice or else this could bite you and your mother hard a few years down the line. By 'specialist' I don't mean the person dealing with the transfer.

My suggestion is to postpone it for the moment and do some research. You will find plenty of threads on here about the potential pitfalls and it doesn't have to be fraudulent for it to backfire.

CLAPTON

lets see

she transfers the house to you for nothing
and you get a mortgage on the property
this gives you a deposit for a new property and an equal debt.

lets look at some consequences
suppose your mum wants to move... house is sold and a new one bought then you would have to pay capital gains tax (cgt ) as you don't live there.

even if that wasn't a problem you would have to get a new mortgage on the property which may or may not be possible (depending upon your circumstances at that future time)

suppose you are or get married
-if you die then the house is your partners and not your mums... could be bad news for mum
-if you divorce it could become part of the divorce settlement and you mum could loose her home.

If you fall on hard times and can't pay the mortage then the house could be repossessed.


Now does it actually help you..?
your potential lender will see you have substantial deposit which is good news but that you have a very large debt that need servicings which is bad news...
so they will take into account your debt in assessing the 'affordabiliy ' of the mortgage so you might even be worse off

in any event can you actually afford to pay the two mortgages?
In effect you will be having a 100% mortgage on your property


Unless you mum is very old and not expected to live much longer then just don't do it.

poppysarah

All sorts of problems. If the house is to stay your mums home then don't borrow money on it. Don't include it in any sort of house transaction of your home.

VIGILANT22 has raised some very valid points about benefits etc.

margaretclare

Your Mum no longer owns the house she lives in, you own it. She is therefore your tenant and you are her landlord.

The first thing to do is to agree a fair rent she needs to pay you, for you to give her a rent book and to collect her rent. It has to be a rent on a level with rents being charged for similar properties in the area. This rent becomes part of your income and you need to declare it on your tax return.

Jowo_2

Why can't your mother put her time and energy into a proper will that can't be successfully disputed after her death? The kind of transfer you are considering is going to cause a huge family schism while she's alive...

Google 'deprivation of capital'. One risk is that if your mother goes into care, social services sometimes include assets that the recipient has transferred This means she will be regarded as having the property for the purposes of calculating means tested benefits despite offloading it (notional capital) - this could cost her dearly.

You could also encounter future benefit claims problems if you wish to claim means tested benefits in the future because you become a landlord/home owner even though she lives there and that can affect eligibility for many things.

For example, suppose you lose your job and want Housing Benefit for a rental property that you live in or mortgage interest support for one you additionally bought, that could potentially be impossible while you are considered to own another property that you don't live in.

As your mother would become your tenant, you would be legally responsible for the cost of all repairs there.

There have been issues posted on this forum before by parties who have signed their property over to family members.

For example, two siblings were gifted the property by their mother on the understanding that she could still live there. The mother who wanted to sell it in order to move in with one sibling, wanting to live with her daughter when she became infirm, and the other sibling got jealous and refused to sell the property to facilitate this.

In another example, a mother took on a part-share in the purchase of a property to help her daughter onto the property ladder. Years later, the daughter and her partner got no nearer to earning the income she needed to take over the mortgage in full, preferring to have children rather than getting employment. Now the mother is suffering because she can't claim key means tested benefits to support herself as she's lumbered with home-ownership. She cannot transfer the share to her daughter as she'd be judged to have deliberately deprived herself of capital and would get her benefit claims rejected that way and her daughter and her partner have not shown any great intention to buy her out.

Trollfever

neither of us can afford silly fees

The fees will not appear silly if it all goes pear shaped.