Buying Mum's house v Equity Release Co - HELP

CC4444

My Mum is going to sell her house to a equity release co if I do not buy it. Worth £200,000 I need £40,000 mortgage / loan.

I have been told I need a Buy to let mortgage or a secured loan (against my property) and draw up a transfer of ownership contract.

My total outlay will be £90,000 (£60,000 to pay off remaining mortgage, 10,000 lump sum to my Mum, 2 x 10,000 to siblings payable after Mum's death) plus capital gains tax 18% currently and interest payable on the mortgage or loan I take out.

should I be doing this at all or just saving some money for the next four year and paying of a lump sum on my own mortgage and reducing the interest I will have to pay over the term. My own bank/ mortgage company will not advance any more money to me for this venture even thou my property is valued at £300,000 and I only have a £100,000 mortgage.

Advise needed desperately :eek: Christina

Annisele

Apologies if I'm being dozy, but I'm confused.

Your mum's house is worth £200k - so why isn't your total outlay going to be £200k?

VIGILANT22

http://www.ageconcern.org.uk/AgeConcern/Documents/FS40Deprivation_of_assets_in_the_means_test_for_care_home_provision.pdf

CC4444

£200k is the market value the mortgage only has £60,000 left to pay. My mum will continue to live in the house until when ever.

Annisele

I'm not sure if you're asking for comments on the whole plan, or just on the funding of the plan. If you're asking about funding, a bit more detail would be helpful - what is your current income, do you have savings (don't care how much in total, just how much would you be prepared to put towards this plan), how much rent would you be charging your Mum, and have you been given any idea of the interest rate you'd be paying on the BTL mortgage/secured loan.

Comments on the general plan...in short, I'm not convinced I'd touch it with a bargepole (from either your side or your mother's) unless I was absolutely convinced it was the only option. Have you thought about just lending/giving your mother some money?

I think that if you want to go down this route then you and your Mum should take separate legal advice - the concept is fraught with potential problems.

Essentially, I think you are proposing that:

1. Your Mum's house - worth £200k - is transferred to you
2. You pay off your Mum's £60k mortgage
3. You give your Mum a lump sum of £10k
4. You pay each of your two siblings £10k on your mother's death
5. You allow your Mum to live in the house (rent free?) for the rest of her life.

Vigilant22 has posted a link to Age Concern's factsheet on deprivation of capital; that's well worth looking at.

Other problems I can think of offhand (there will be others):

• What sort of security of tenure will your mother have? Are solicitors involved to draw up a lease? What will she do if you all fall out and you decide that you don't want her living in your house anymore? (I'm sure you have no plans to fall out, but it does happen - and your mother really should make sure her legal rights are protected).
• Your siblings might be a bit annoyed with this plan - it looks as though you are getting £200k worth of house for only £90k.
• There might be IHT issues (depending on the total value of your mother's estate).
• What happens if you go bankrupt and the OR wants to sell the house your mother is living in?
• What happens if you get divorced and your OH forces a sale of the property in order to get 'his half' of the marital assets?
• What happens if you (or your mother) need to claim benefits? How will the transaction affect means-tested benefits?
• What happens if your mother wants to move house?
• What happens if your mother needs care?
• Who pays for the maintenance of the house?

new_home_owner_3

VIGILANT22 wrote: »

http://www.ageconcern.org.uk/AgeConcern/Documents/FS40Deprivation_of_assets_in_the_means_test_for_care_home_provision.pdf

GDB2222

Christina, what you are buying is known in the trade as a Home Reversion. These are normally valued as a percentage of the open market value of the property, where the percentage depends on the age and health of your mother.

You are paying 45% of the house value, which is about the going rate currently if your mother is roughly 80 and in normal health. The percentage should go up if your mother is older or in poor health. There are a number of companies offering to buy home reversions, and you can try out their online calculators. Home and Capital have one on their website.

Sooooooooooooo, one question is: how old is she and what's her health like? Does she smoke?

Second, I don't think you'll be able to raise new finance easily. Why don't you just pay down the existing mortgage on your mum's house to £40k, and you be responsible for the interest payments? Is that too simple?

PasturesNew

If she doesn't need the £10k lump sum (isn't about to go off on the cruise of a lifetime), then why not just arrange with your siblings to all bung mum £20 a week apiece (or whatever she needs).... or pay some of her bills, or buy her things ...

Much simpler.