Purchasing Parents Home - Mortgage Advice

nissan25

Hi All

Brother still lives at home with mum. Mum has outstanding mortgage of £60k, value of home approx £100k - £110k.

He is looking to mortgage the property on his name (effectively purchase from her with her consent). Mum is a pensioner now so would take financial burden from her and she is effectively gifting him the remaining equity (40-50k). He's the youngest and we are all married and have our own families and he woul like to remain in family home, hence not moved/buying anywhere else.

He has a salary of £22500 (his GF can be added if necessary she earns £14K) and will be looking a mortgage of 90k to pay off mums o/s mortgage and the remaining 30k for home improvements and debt consolidation. He has no deposit and they both have good credit histories.

Should he go to a whole market broker?

Is he likely to get a mortgage with the circumstances of gifted equity v no deposit etc?

Any advice for him would be most grateful from an experienced broker / anyone who obtained a mortgage in similar circumstances.

If any further info is needed please ask.

Thanks in advance

Thrugelmir

Alarm bells ring when I hear debt consolidation.

How much debt does your brother have?

GMS

Debt consolidation with monies for a purchase would not go down too well with a lender.
Where is your mother planning on living when the sale goes through? Some lenders would require her to move out on completion.

CLAPTON

where's mum going to live after he buys the house?

nissan25

Thanks for the replies.

He has an unsecured loan and credit cards of about 15k. he was intending to use the extra borrowing on the mortgage (30k) to pay these off and the rest (15k) for home improvements. so perhaps debt consolidation may not be the exact phrase. sure lots of people borrow extra on their mortgage for these reasons, its quite common.

i was not aware it could be a condition that mum would have to move out if he was to purchase the property from her! why would that be?

mum will remain in the home after he buys it - he was buying it as he intends remaining in the family home in the event anything was to happen to her.

Thrugelmir

nissan25 wrote: »

sure lots of people borrow extra on their mortgage for these reasons, its quite common.

Was the case until the credit crunch hit. Then the game changed.

In general, mortgage underwriters consider someone that is careless with their personal financial management as highly likely to repeat their mistake again in the future. (Human nature). So with limited funds to lend now. Why should they take the risk?

CLAPTON

how old is mum?

if son & gf own the house

1- and son & gf fall out and gf wants her share of the house what happens to mum?
2-if son (sadly) dies and then GF is sole owner what happens to mum?
3. if son gets into further financial difficulties and house is repossessed what happens to mum?
4. what happens if son & gf have a family and want to set up a separate home...

CloudCuckooLand

Mum would not have security of tenure, after removing her name from the deeds. Her solicitor should prevent her from endangering her future in that way.

Suppose your brother fails to keep his debts under control, then the house is repossessed and your Mum is turfed out..? A great retirement.

Such a large amount of equity being "gifted" to the son, could be an issue under "deprivation of assets" rules.

If your brother believes he can afford a £90k mortgage, he should use that monthly income to clear his debts. In a couple of years taking out a mortgage becomes easier as the amount would be smaller without debts involved, and the interest rate less painful as it would be a lower LTV, etc.

Keeping in it Mum's name and paying her "rent", would ensure her ability to afford the mortgage. Without removing her name from the deeds and endagering her security of tenure...when she needs to sell to fund care, he can then buy it without concerns over her tenure.

GMS

You state it is quite common to borrow extra funds to repay debts. True, but in a remortgage situation, not a purchase. Lenders would not be happy with the gifted deposit/debt consolidation.
Your brother needs to speak to a broker. Whilst it sounds like an easy transaction it is not.

nissan25

Thanks everyone for your replies.
Few answers to scenarios posed:

Mum is 63 and has provisions made in the event of ill health / care needs. She can afford her mortgage payments but as my brother is the youngest, mum has suggested if he doesnt wish to move / purchase another property he has the option as originally posed. Her future will be secure.

Brother will have life insurance and will made obviously in the event anything was to happen to him. He wants the home to remain in the family hence his reluctance to move elsewhere.

He intends mortgaging on his own as he should be able to get the amount required on his salary. His GF is aware how strongly he feels about keeping the family home. She will not contribute towards the mortgage just houshold bills (though her name will not be on them) as she lives there - therefore her name will not be on the mortgage deeds. They do not wish to purchase a home in the same area costing more when this option and family home is available

For what purpose / to whom would mum be depriving her assets? All is perfectly legal - were not talking millions of pounds (90k - 100k mortgage on a house value of 110 - 130k) or inheritance issues etc. If there is anything else we have not considered please advise so i can pass on.

In the event if brother gets into financial difficulties (which hes not in as you suggest) he can afford the repayments on his loan / cc we as a family would ensure mortgage payments are made until he was employed again etc. He was simply suggesting that extra money on his mortgage is borrowed at lesser rates (although over a longer period) than cc/loans and means he would clear and only have 1 main financial committment. He will be also be taking a Mortgage Protection Policy.

When / if they decide to have a family they will remain in the home its a 3 bedroom with the option of converting to 4 / adding an annexe - no problems there. Mum loves the company seeing dads no longer around.

I also suggested to him to clear his cc and loan by overpaying so he could obtain a better deal in a year or so but this post was originally to seek views from you knowledgale people to get a better understanding

CloudCuckooLand

Gifting £40-£50k of equity is quite a sum, that the council may have issue with if Mum needs to go into care. Pension Credit may also be affected. Have a read of;
http://www.ageconcernliverpool.org.uk/uploads/documents/Fact%20Sheets%202010/100310/FS40Deprivation_of_assets_in_the_means_test_for_care_home_provision%5B1%5D.pdf

Why does he not just go halves with Mum? Keep both names on the deeds. Give them both some protection.

'Tenants-in-Common' ownership would prevent the council from selling the whole house, as I understand it. Though professional advice, from a solicitor should be sought to confirm that.

For all the good intentions, life cover, family support etc, you simply cannot know what might happen in the next 20 years. Everything should be done to provide Mum with the most secure retirement. Her will can give it to the youngest son, if she avoids a care home, or he can buy if it looks like she needs one, to keep it in the family.


As Age Concern say;

Important
It is advisable to seek proper legal and financial advice before
proceeding with any transfer. Age Concern England is not able to
give this advice. The Law Society has produced detailed guidelines
for solicitors on gifts of property and their implications for long-term
care. If you consult a solicitor you might wish to establish that he or

she is aware of these guidelines.