Buying with family for family

Doodle_Loo

Hi all

Wonder if you could offer some advice.

My MiL is looking at buying a property but may not have quite enough capitalto get what she wants. (She is renting at the moment).

She is retired so BiL has suggested that we might take out a small mortgageto cover the difference to enable her to buy.

I spoke to our mortgage company yesterday as we already have a mortgage andfinancial commitments who said the minimum they would lend would be 50k andthat effectively we would be purchasing the house with MiL 'gifting' hercapital into it rather than us having a small stake in her property...doesanyone know if this is standard?

Obviously I realise there are implications for us as in this case theborrowing would reducing our ability to get credit in the future (until paidoff) and the risk of taking it on but am I missing anything else?

Also does anyone know of the longer term considerations such as inheritance tax or tax liability for the 'gifted' capital?

Thoughts and opinions greatly appreciated.

Doodle

kingstreet

One simple fact is that those named on the deeds all have to be named on the mortgage and this is where the problems start.

You will have difficulty getting a mortgage for a decent term if you include someone retired on it.

For her to not be named on the mortgage, she can't be named on the deeds, so effectively her home doesn't belong to her.

If she gives you the deposit and you buy the house, there's potential for a claim of deprivation of assets if she needs care in the foreseeable future. Inheritance tax only becomes an issue if her total estate is worth more than the nil rate band, currently £325k, at date of death. When you sell the property, you may be subject to Capital Gains Tax, as it won't be the principle private residence of the owners.

The £50k thing is what your lender stipulates. Most have lower minima.