Mortgage for family member

bloolagoon

Evening all

My mother in law would like to move into a bungalow for health reasons. The difference in price between her home (owned outright) and bungalow's is approximately £40-50K.

She has no income other than a pension so this isn't possible but my husband and would like to pay this for her, as it is in her best interests. She is against this as she says that she will leave her house to both children and he will be paying for his sisters inheritance.

Is there a way we can do this? Maybe getting some form of document to show that the equity for the additional (or loss) is ours alone.

Would they allow us to take an additional mortage if not living there and would wish it to be in her name, would they allow us to take over say 20 years ( we are in early 40's) to keep payments low?

Is a broker best for this?

Apologies if I don't return until tomorrow given the late hour but any advice is appreciated as she really needs to be in a one storey home for mobility problems.

holly_hobby

Ok ..

You can source a 2nd mortgage for Mum - which is technically a mortgage for a dependant relative.

As a 2nd mge, your incomes shall naturally have to be sufficient to service the mortgage, and you will naturally require a deposit and funds for conveyencing fees/stamp duty etc.

The max term will be consistent with your ages - not Mums, as she won't be able to be party to the mortgage, nor on the deeds. (to do so would massivly restrict the maximum term, which would be based on Mums age i.e the oldest applicant).

Following which, as Mum will not be party to the mge or purchase, the property will not belong to her, nor will it form part of her estate on passing. Thereby as it will be in you and your partners name, the free equity will be effectively ringfrenced from the Sister in Law.

Obviously on Mums passsing, you will need to decide what you want to do with the property, sell (you will be exposed to CGT, less permitted reliefs/allowances), move in yourself, or seek consent to let - or whatever suits !.

A broker will be best placed to source the most suitable mortgage provider and product for your situation, whilst supporting you throughtout the mge process and beyond.

Hope this helps and good luck

Holly

Dave_Ham

Echo Holly's post and information provided.

Having brokered many cases similar to this, I always find engaging your Sister In Law now will save grief in the future.

You can explain your noble motives for doing this and invite her to also be party to the mortgage, for protection and parity.

Subject to income, credit score, current commitments etc. this can be pulled together, get Mother In Law what she needs and everyone be protected.

You need to be clear and put protection in place now, in case care is required further down the line.

All the best

Wh05apk

The issue you will be having here, is that your mother will be providing the deposit, and also retaining rights over the property, which I think few lenders will accept (unless she was to "gift" you he deposit and have no rights, which she clearly is not)

Possible other routes could be equity relase for her to purchase in her sole name, although this will be dependent on LTV and age, or failing that could you raise the mortgage on your own property, then use to purchase the property either jointly or in her sole name, with a deed of trust to protect your capital/share of the property value?

Remember if the property is in your name, their may well be CGT implications hen you come to sell.

getmore4less

Watch out for gift with reservations, preowned asset and deprivation of asset issues.

bloolagoon

It does appear it may not be as straightforward as I thought. Ideally I would like the house to remain in her name but gift her money.

Would it be easier if I released some equity in my own home and gave this via money as opposed to a mortgage?

If and when the bungalow was to be sold (when my mother in law doesn't need it for whatever reason) I would remove the difference.

I have approx £160K equity in my home and only using 2 x single income (I have recently been made redundant and started a new job so wouldn't be considered) so we should have borrowing capacity.

Yorkie1

I am no expert but if you did give via money rather than a mortgage, I think you may be able to put a charge on the property to the value (or % ?) so that when the property is sold, you get your money - or the same % - back before any other costs are taken from it (eg residential care home fees) or any inheritance split.

Hopefully others will comment one way or another on this.

Wh05apk

If you raised funds on your property, you could place a charge, or deed of trust to protect your share.

With regards your income, provided you are on a permanent contract (even if on probation) you should still be acceptable to most lenders.

bloolagoon

Kind thanks to everyone who has responded and given up their valuable time to assist.

I think going forward the best route is to raise money from my own home via equity (although we do have ISA/Tessa's if needed) and place a charge on the new bungalow to that percentage.

This will allow mum to remain fully in charge of her own home (and therefore will always be hers to do so as she wishes), yet protect our investment/deposit should she need to fund care, which I fear may only be a few years away.

I would not feel comfortable having the deeds in my name only so feel this is the best option to discuss.

I will ensure my mortgage company will release funds then have the discussion with the family but it is extremely reassuring that if mum wishes to move to a more accomodating home this is available to her. Just the pride hurdle to overcome which may be more difficult than the mortgage issue ...

Kind and heartfelt regards to you all

bloolagoon

Just an update, mum is very happy in her new home, thank you all for your invaluable advice.

kidmugsy

Hats off to you, Bloo, for reporting back.