buying a house after dad's death

honory

Hi all,
This is me just thinking aloud so bear with me!
My husband's father died unexpectedly a year and a half ago and at the time his mum said that she would be in a position once she had sorted her own finances out, to help us buy our next house. This next house would be to a more expensive area (nearer to her) and to a house with more rooms and land than we have at the moment. It would mean that we would be going from a £220,000 house to a £550,000 house. We have found the house. I work nearby and the commute (should we be able to move to that house) would decrease from 1 hour to 15 minutes. Our children would also be able to go to a village school rather than commute with me as they do presently - my 5 year old at the moment sometimes has a 12 hour day (leaving house at 6.45am). The trouble is we don't know how best to suggest that the mother-in-law finances the house purchase. She has an £800,000 house with no mortgage and is 62 and just retired - would she be able to raise a mortgage on the current property to fund the purchase? Would that mean that she could then buy the property for us and we then rent from her? She also has money in investment form which she could access (about £200,000) and this would be surplus to that she needs for an income. We have no idea how best to work it and would appreciate as much advice as you all can give.
We have about £70,000 equity/savings that could act as a little contribution but the problem really is that my husband is self-employed and will only file 2 years accounts in february. I will be full time from next september (parttime at moment because chidren are small).
We know that we would not be able to get anyway near the mortgage we need to buy the house on our own and have only been in this fortunate position through a really dreadful bereavement. It is also his mum's wish that she help us and that (more importantly) we live nearer to her - this property also has scope for a granny flat.

JasX

Your mother in law has a £800,000 house and £200,000 cash plus income generating assets she lives on?

I'd be taking some serious advice on inheritance tax planning as being well over the individual allowance you'll be looking at a huge bill when she passes on.

Did the father in law leave everything to his wive and make zero use of his personal tax free allowance? if so definitely worth taking advice on whether its possible to alter his will in a more tax efficient way (i think you have up to two years following death but don't quote me).

Ideal solution would likely involve transfer of some assets from your husbands parents estate to him in a tax efficient manner.

regarding house purchase I'd avoid any arrangement that leaves your mother in law a pensioner WITH a mortgage.

getmore4less

With assets of 1million she needs to do some serious estate planning if that has not been done allready.

Even with a full nill rate band transfer there is a tax bill iof around £150k looming.

Back to the question.

Well you really should have worked out how much you have to spend before looking.

But given you have looked.

You have £70k equity savings, new place is £550 add 4% SDLT £22k + moving costs say £10k.

So you are trying to raise £512k, if you use up all the MIL investments that leaves £312k what are the incomes of each of you including the MIL? are they over £80k-£100k because that the level you will need.

AS for MIL getting a mortgage what's her income? With gauranteed index linked pensions that are in excess of normal living requirements she might be able to release some equity.


Another angle is for MIL to move out of the £800k place into something cheaper and possibly more suitable long term or you move in there.


I think you need to let the MIL take the lead rather than speculating.

Ask her. "you now when dad died you said you would like to help us and have us move closer, how do we make that happen?"

getmore4less

JasX wrote: »

Your mother in law has a £800,000 house and £200,000 cash plus income generating assets she lives on?

I'd be taking some serious advice on inheritance tax planning as being well over the individual allowance you'll be looking at a huge bill when she passes on.

Did the father in law leave everything to his wive and make zero use of his personal tax free allowance? if so definitely worth taking advice on whether its possible to alter his will in a more tax efficient way (i think you have up to two years following death but don't quote me).

Ideal solution would likely involve transfer of some assets from your husbands parents estate to him in a tax efficient manner.

regarding house purchase I'd avoid any arrangement that leaves your mother in law a pensioner WITH a mortgage.

Unused nill rate band transfers to spouse now.
Still agree this needs some serious planning sooner rather than later.

There is a £150k bill looming anyway and potentialy upto £270k
Actualy missed the bit about other assets providing income so it could be even worse, I would have though some of this must be in trusts allready.

I wonder if the OP does not have all the facts about her MIL estate.

beecher2

I agree that you have to ask your mother in law what she meant by helping out. She might have a less expensive property in mind so best to have that conversation now before planning anything else.

CloudCuckooLand

Is probate all settled? How long ago it was settled, might affect whether Mother has got round to considering the next steps.

A 'family conference' sounds necessary.

Mother might have all sorts of plans in the back of her mind.

1) Move everyone into the £800k place.
2) Sell the £800k place, get something for half and fund your move with the difference.
3) A remortgage.
4) Some other plan.

No-one knows but her. You need to broach the subject and let her lead the conversation.

Then you need to sit down and understand the tax/inheritance/long-term effects of "the plan".

honory

Thanks for all your replies.:T
I agree that we need to seriously consider the inheritance tax implications of everything. We earn upwards of 100k as a joint income (and this can go up as my husband is self employed and this is a conservative estimate) and have no other debts - apart from our mortgage. Yes a lot of what we think we know about our mother-in-law's financial situation we need to clarify. She also needs to see a independent financial adviser - at the moment she sees a Lloyds Bank wealth manager which seems, as she banks with Lloyds, a bad option.
Whatever mortgage she took out on the property we would ensure it was a limited term. She has enough to generate an income from her pension as she had a great final salary package from the university of london.
How do you go about finding a good financial adviser?

honory

Because we need to have a proper conversation with his mum that involves financial advisers etc. what should we do? Should we take up the offer (it is being advertised to sell and to let as the vendor has already purchased and lives in another property) or taking a six month let so that things can be worked out? Or should we make an offer on the property (maybe 500,000) and if it is accepted we can sort out the nitty gritty as we proceed? His mum is seeing a financial adviser from lloyds this month but what do you think about approaching another adviser?