Inherited House Issues

Dual

Apologies for the long post but I need some advice on a property issue.

My step father died just over a year ago, the property was in joint names with my mother and the property passed soley to my mother upon his death.

Problem was mum and dad still had a £60k mortgage on the property on a repayment basis, mum couldn’t afford the £500+ per month payments, I was helping her but it was crippling me also.

I took the decision wrongly or rightly to change her mortgage to Interest only over the next 15 years to bring her payments down to £250 per month which is manageable for her and I top her up if she is short on the mortgage payments (most months). When we changed her mortgage I went on as the second lender because they said her income wasn’t enough to cover the £60k borrowing.

Anyway, the issue here is when mum dies, according to her Will the property passes in equal shares to my brother and myself. But as I am the second lender will the property automatically become mine? I am already a second borrower on my own home where I live with my partner.

My intention would be to sell the property on after mum dies (hopefully not anytime soon) and split the proceeds 50/50 with my brother once paying off the mortgage company their £60k

Will I be liable to CGT or IHT? The property is worth around the £160,000 mark currently.

Im just thinking of the future, whether in a couple of years when we are out of our initial “lock in” period with the mortgage company, whether we should take another route with the mortgage etc. I will be upset if I have to pay CGT on my share and not my brother as he isn’t paying towards the mortgage at all.

Am I breaking any laws by being the 2nd lender on 2 properties?

Can anyone advise what the best route maybe.

Many thanks in advance

Mrs_pbradley936

You are not breaking any laws by your borrowing but it might not be the most sensible thing you can do because as you are finding out there are complications. I think you should get your mother to downsize into something that she can manage without your help. That way the mortgage is cleared and you are both out of debt, her tax affairs become less complicated, there is no conflict between you are your brother and you are not committed to subsidising your mother for the foreseeable future.

There are issues to this which you may not have considered. Such as what happens if you are no longer able to help out? Plus if the house takes mother over the Inheritance Tax Threshold (perhaps not now but in a few years). All that will happen is that most of the equity in the house will go as tax and will not be available to be divided between you and your brother so your fears about fairness are irrelevant. The problem for you is that you cannot have more than one primary residence.

EdInvestor

The value is a long way off the IHT threshold (shortly to go up to 300k) so I wouldn't worry about that.

How old is Mum?

I agree downsizing should be considered - could she buy something for 100k, so there was no mortgage at all?

Another thing that could be considered is equity release, though this is a not a good idea at a young age and will eat into the inheritance.

Does Mum work?What will be her situation when she retires re income (and pensions and benefits)? Does she get a widow's pension now?

An overall financial review might help a lot.

Dual

Thanks both for your advice here.

Mum is 72. We already spoke about her downsizing after dad passed away but she doesnt want to, memories and all that which I can understand totally, I think id be signing her death certificate if we made her move. Plus the type of property she would get for 100K around here would be naff. She has good neighbours, they all watch out for each other. So downsizing/moving isnt an option for her.

She doesnt work, she retired sometime ago and is now registered disabled, she gets around but very slowly!

So I think for now I will remain on the mortgage as second lender. Will the property automatically become mine when she dies?

My son who is 18 also now lives with her as company. What about the house being left to him in the will as it will be his place of residence?? then he can sell it on and we can sort out the split at a later date, will this help in anyway. Im just trying to avoid all the taxes

Thanks again

Mrs_pbradley936

Well for the Inheritance Tax you have to come below £300K before it kicks in, remember to include all her assets in this. She might have Premium Bonds, money in the Post Office and so on. If the house is her only asset then she is unlikely to come above the threshold any time soon.

It is possible/feasible for her to leave the house to her grandson. But be aware of the pitfalls such as him not being willing to sell it to divide. Also be aware that should she need to go into a home if she gets infirm there are issues surrounding that.