buying off a relative

Pejsan

I am currently looking to buy my Grandmother in laws house. We have agreed a fair price based on similar properties in the area.

The house is valued at £55000 I have 5500 deposit so looking at 90% LTV.

The mother in law wants to give us £5000 back to assist with our fee's and to modernize however she is currently in Care and her pension doesnt cover the full costs hence selling the house. Her current care cost short fall is nowhere near the worth of the house but wondered.

Can she do this does it need to be written into contracts what are the potential issues if any we would face

holly_hobby

As long as it is sold at market value, then there will be no case re deprevation of assets (DOA).

Her gifting you the 5k - either by cash or by pch under family discounted arrangement, will be seen as DOA - re any LA MT assistance, so they will take this into account in any assessment.

Hope this helps

Holly

Yorkie1

Just to expand Holly's point about DOA.

This is 'deprivation of assets'. Essentially, if she gives away £5K to you in whatever form, or sells the house at an undervalue, she is treated as if she still has those assets.

So, for any means tested elements e.g. care fees, the council will treat her as if she has the £5K in her account and it will affect what she needs to pay towards that care etc. The bald reason being that the state / taxpayer should not be expected to pick up the tab where people have chosen to give away their money.

So by giving you the £5K, she is putting herself at a real disadvantage financially and would be best advised not to do it - even though she just wants to do something nice for you.

amnblog

If your question is targeted at the effect on you. Lenders will usually be comfortable with this arrangement. You must declare it to them.

Pejsan

Thanks for the replies. Would it be possible to avoid the DOA if the £5000 was offered as a buyers incentive within the sale ie 10% deposit paid on completion of sale?

somethingcorporate

I wouldn't have thought so as she was still intentionally depriving herself of the £5k.

Thrugelmir

Pejsan wrote: »

Thanks for the replies. Would it be possible to avoid the DOA if the £5000 was offered as a buyers incentive within the sale ie 10% deposit paid on completion of sale?

Given the limited deposit that yourselves are injecting into the property as equity. Then any potential lender may well have grave concerns as to the risk that they are exposed too.

holly_hobby

Pejsan wrote: »

Thanks for the replies. Would it be possible to avoid the DOA if the £5000 was offered as a buyers incentive within the sale ie 10% deposit paid on completion of sale?

No, as she is still gifting you £5k, no matter how its transferred it would still be classed as DOA by the LA for any means tested assessment.

If of course she will not be applying for any MT benefits or assistance within the forseeable future, then her gifting you the 5k is perfectly ok (if it is a true gift without reservation), and the lender will be happy with this.

Hope this helps

Holly