Shared ownership with parent

nortonl

Hi

Is there a mortgage product which would allow the following arrangement:

Son purchases property for him and his family to live in. He would provide 50% of the purchase price through combination of a deposit and mortgage loan.

The mother would purchase the other 50% in cash and charge a favourable rent to the son.

The problem is mortgage lenders I have spoken to have said as the mother would be named on the title deed, they would need to be party to the mortgage even though their contribution is 100% capital. This has the effect that the mortgage term cannot go past the mother being 75 and would probably have other implications such as making the mother liable if the son defaulted etc.

Does anyone know of a product suitable for this type of arranegment and also whether there are other implications. I understand the mother would have to pay income tax on the rent if it took her over her tax allowance.

Many thanks.

Thrugelmir

nortonl wrote: »

The problem is mortgage lenders I have spoken to have said as the mother would be named on the title deed, they would need to be party to the mortgage even though their contribution is 100% capital.

This is the stumbling block you face with your idea. Every party on the title deed needs to be named on the mortgage.

Alternative option. Your mother lends you the money. Speak to a solicitor regarding drawing up a proper legal agreement for this. To secure the loan a second charge is placed on the property after the lender.

To avoid/minimise tax issues for your mother. You could then repay your mother a monthly amount consisting of capital and interest. The terms of which should be specified in the loan agreement.

What sum of capital is your mother likely to advance?

What does your mother want from the arrangement?

getmore4less

The key I think is does she want a 50% share of the property and all that entails, like CGT and anything the son pays like rent will also potentialy be taxable.

The other option is a loan, again interest will be potentialy taxable but the son takes all the risk/reward on property values.

nortonl

Thanks for the fast response.

Yes I think so. CGT shouldn't be a problem as she would leave her share to the son (though I guess it would be if he ever wanted to move). The loan option would see her capital erode especially as she doesn't want to charge the son interest.

Thrugelmir

nortonl wrote: »

The loan option would see her capital erode especially as she doesn't want to charge the son interest.

I think that everybody needs to be objective as to what they want from the arrangement. In your original post the mother would receive rent. So no difference in tax treatment.

By being repaid the capital the mother could then reinvest this elsewhere while receiving rent free accomodation.

nortonl

I'm not the son and the mother would not be living in the property.

Originally, the mother was going to purchase a property (a 1 bed flat) with the money and rent it out. This would provide an income for her lifetime and preserve the capital value in real terms to be left to all her children.

Then she considered that she could help one of her sons by purchasing a 3 bed house with him (say 50/50 equity share). This would preserve the above goals whilst helping the son to live in a property otherwise out of his reach. Sort of like a shared equity scheme where she plays the part of a housing association.

It sounds like the answer it's not possible. Thanks for your help.

Senior_Paper_Monitor

There are several ways to structure this depending upon the detailed circumstances/requirements.

An experienced broker or IFA will take her through the options - money well spent in this case.