Buying my mum's house-advice please

kyllerbuzcut

Hi, I am hoping to get a couple of opinions on this problem.

My wife and I are currently living in a house owned by my mum. It is worth about £55k - £59k.
My mum has offered to get us a help on the property ladder and said we can get a mortgage and she only wants £10k for it, no matter how much we get a mortgage for.

Why, you ask haven't I jumped at the chance yet?
The following is the reason ( slightly aside of my main topic)
Well- a coulpe of weeks ago we applied to get a top up of our existing Nationwide loan so that we could buy a car. We got refused. The loan was for 10k and we have about 7k left to pay on it. We wanted to top up to about 19k. We were told about, and then checked out experian and it seems the Halifax doesn't like me for some reason now and have put a big red 8 against me on the report. The note against it says I defaulted on an overdraft of £1000 in september 2000 and the account was closed in 2002. I used to have a student account with them years ago. I can't remember everything at the time but I am sure the overdraft was at it's limit when I went to close it and set up a direct debit to bring the balance back to zero and cancelled everything else to do with the account.

Anyway- the point being my credit isn't as good as it should be because of this. I have started the ball rolling by getting Halifax to look into this and see if they can find out more and hopefully sort it out, but God knows how long it might take them. Personally, I think it must only be in the period we got the 10k loan until now that this has appeared on my report, but they say it goes back years. I can't figure out why they gave us a loan then and not now.

We do want to take up my mum's offer, get the mortgage, include in that money for a car, and also to clear our credit cards at the same time. About 35k should cover the whole lot, pay my mum, and maybe leave 1 or 2 thousand to stick in the bank. The problem is the possibility of getting rejected again and maybe ruining our credit score even more. I have already tried to do a mortgage thing online at nationwide's site but it didn't look too promising.

What I'd like to know is- will a bank ( my wife wants to go with Nationwide as she has banked with them for years) go for giving us a 35k mortgage on a 55k - 59k property? Both our credit scores don't seem to me to be THAT bad. Does anyone think that the bank (the Nationwide, preferably) might change their minds if the amount they are giving us is secured on a property, under the mortgage?
One more thing I have been thinking about. IS it possible that if my mum just signed the place over to us, we might be more likely to get a remortgage or something for the amount we want, then give my mum her cash from that? Is this a viable option, and are the percentages you pay on that worse?

sorry that took so long
Any and all replies gratefully appreciated
Thank you:)

lisyloo

How old is your mum?
Does she have plenty of other money?

If she has plenty of money then that's OK, but if she might need benefits in the future e.g. long term care, then you might run into problems (hence the question about age).

It's isn't legal for anyone to give away their assets and then claim state benefits.
The time period doesn't matter (I've seen a case going back 18 years where a house was given to a child).

I'm not saying this is what you or she are trying to do, but it's something to be aware of if she might need benefits.


"One more thing I have been thinking about. IS it possible that if my mum just signed the place over to us, we might be more likely to get a remortgage or something for the amount we want".

Wouldn't make any difference. You would have to be putting it in your name at the point of sale anyway, so whether you already own it or not doesn't matter.

Your best bet is to consult a broker, they do this day in, day out and will be able to advise.

Most likely you will be able to get a mortgage as your history isn't that terrible.
The worst case is that you might be restricted to certain lenders and might have to pay a bit more than people with perfect credit history.

Bossyboots

This is not simply a question of whether you can get a loan. As has been pointed out this situation affects future benefit entitlements.

In addition, there is inheritance tax to consider. If I have understood right, your mum is proposing to sell you the house for £10,000. Your mum needs a Deed of Trust to safeguard her position and stop you from being able to ask her to leave. If you buy the house for that value, the difference between the £10,000 and the market value becomes a gift. If she dies within seven years you will be liable to pay IH on the gifted portion of the property on a sliding scale according to how many years have passed.

Then there is the question of whether a bank will lend you the money with your mum being a life tenant. Anyone over 18 living in a property that is being mortgaged will have to seek independent legal advice and have a form signed stating they have received that advice and acknowledging that the mortgagee has precedence over them. This is clearly contrary to your mum's interests and conflicts with the Deed of Trust.

Again, if the house is just signed over to you without payment it becomes a gift and remains liable to IH for seven years. Your mum still needs her position protected with a Deed of Trust.

kyllerbuzcut

Thank you very much for the advice. To answer some of the questions, my mum has plenty of money and is planning on going for another house soon. I am currently living in the house in question that is to be mortgaged.
We basically want to get a car, pay off our current loan, and also get a mortgage, thereby getting on the 'property ladder', giving us an asset to have when finding somewhere to live later when we want to move. My mum wants to help get us that and has proposed that since our attempt at getting a loan failed she would sell us the house at a reduced rate ( Is this really a lot easier to get from banks?)and only take 10 thousand from the deal, giving us the remainder of what is left - probably about 20 thousand.
Again many thanks:)
lots of help so far, and so fast.