HELP...Buying house off mother in law?!

browrich

The house we live in is ours in all but name.
My husband couldn't get a mortgage 7 years ago so his mother took out a mortgage for us in her name only. We put down a large deposit of our own money so she only has a small mortgage for us (although its classed as her second home). We want to buy our house from my mother in law but does anyone know if we can just take over her mortgage or if we have to buy the house from her for market value?
If we do have to buy it from her can we use the profit from the increase in its value (which is ours) or will that be tied up and not released until its sale therefore meaning we have to take out a mortgage for the time being for the full amount(market value)?? Any help would be most welcome!!
P.S we live in England.

homer_j_3

You cant take over the mortgage as she has to remain on the mortgage. You will need to buy the house from her and take your own mortgage on it.

The actual price you pay and how you do it will depend on the lender and what you agree with your mother in law. What was the agreement at the time, did you pay the mortgage payment to her as a form of rent?

You should be able to use equity how u like providing the lender is prepared to lend you the amount you require

browrich

No we are not paying rent and have no such agreement. We pay all mortgage, insurance etc from our account to hers each month.
I am just wondering if we buy our house for say 200.000 if we need to take out a mortgage for that amount as surely the profit of say 110.000 which we were going to put down as a deposit, wouldn't be there until the house is sold?!? Does this make sense or am I way off here???

Mr_helpful

You can buy from your mother at whatever price you like. You cant just take over her mortgage but you can take a new one out for the same amount. She may have to take out bankruptcy insurance if she is selling at a heavy discount and stamp duty could be payable. but not really that dificult to do

silvercar

you can pay what you agree for the house but the inland revenue may want your MIL to pay capital gains tax on the difference between the current market value and the value at the time she bought it. This is because it has not been her home.

You would need to justify to the IR that it has been your home in all but legal title and that the reason it wasn't put in your names originally was to enable a mortgage to be available rather than any plans to avoid tax etc. This is possible to do but a case will have to be made. The fact that you can show that you have effectively been paying the mortgage will help.