Pls help on getting house from my mum with mortgage

best-of-the-best

Hi, all, I have been getting a lot of very important info here thanks to the forum and very helpful posters.. Here I have got questions about the situation how to go about..

My mum has a house 120k worth with 60k mortgage on it, which is rented out and she is living with me at different place which is I rented out.

Now she is turning it to pensionable age, and she doesn't want to have any affect on her pension with the rental income, so she would like to transfer the house on my name, and I will pay the remaining mortgage, I managed to get an mortgage in principle as I am on a good job, so got quite easily, but now the question is, is there any simple way of doing the transfer over, or do we have to still go through buy and sell process, even my mum gifting it to me the remaining finance?/

If it is than what is the solicitor costing involved in there?? do we both have to get separate solicitors??

Really appreciate your help... thanks.

Tixy

How long has mum's the property been rented out? is her mortgage a buy to let mortgage?

You may need to consider possible capital gains tax and also deprivation of assets rules.

Aside from that you will still need to involve solicitors, your mortgage company will require a valuation of the property and may require you to have a separate solicitor to mum.

Are you going to live in the property? or you and mum? or are you planning to rent it out? If you are renting it out presumably you have got a buy to let mortgage in principal, not a residential one?

Annisele

best-of-the-best wrote: »

Now she is turning it to pensionable age, and she doesn't want to have any affect on her pension with the rental income.

Can you explain a bit more about what that means? If she's trying to reduce her savings in order to maximise benefits, that's unlikely to work. If she's trying to do something else, there may well be an easier way!

best-of-the-best

Thanks Tixy for your quick response, and very informative, my mum has been renting out since Apr 2011, and yes it is buy to let mortgage.

Regards to capital gains tax, as she is gifting me, and also the difference between her purchase price and current one, is less than personal earning allowance limit, so she should be ok with it, if I read it right on HMRC website, but I don't understand about the other thing you mentioned of deprivation of assets rules..

None of us going to live at that address due to my work place change at very distance from the house, so the same tenants going to live there.

Also because this will be my first house, mortgage advisor told me that you can't have buy to let mortgage so I had the mortgage in principle is residential one..

Mr_Pitiful

best-of-the-best wrote: »

but I don't understand about the other thing you mentioned of deprivation of assets rules..

Deprivation is when you deliberately dispose of assets or savings to gain an entitlement that you would otherwise not be entitled to.

best-of-the-best

Hi Annisele, basically she is going to claim from September jointly with my dad, for pension credit(I should have said bit more clear sorry), so when if there is an income it will affect their claim.. but let me know if there is an easier way of doing without loosing any benefit..

Tixy

Deprivation of assets relates to future requirements for elderly care. I don't know the ins and out but basically its about trying to avoid care home fees in the future, others could advise better but you do need to look in to it.

You won't be able to let it out on a residential mortgage unless your lender gives you consent to let, which would be unlikely in the situation. Is consent detailed in the mortgage in principal?

Annisele

best-of-the-best wrote: »

I don't understand about the other thing you mentioned of deprivation of assets rules.

In brief, the rules mean your mum might be treated has having capital even if she hasn't got it. So, if she wants to claim a benefit that's only available to people with less than £x in savings, she might not be able claim that benefit if she's given money (or half a house) to you.

None of us going to live at that address due to my work place change at very distance from the house, so the same tenants going to live there.

Also because this will be my first house, mortgage advisor told me that you can't have buy to let mortgage so I had the mortgage in principle is residential one..

In that case, either you misunderstood or you need a new mortgage adviser...

If you won't be living in the property, you need a buy to let mortgage (or consent to let, but you won't get one of those straight off). Depending on how much you earn, that could be difficult as a first time buyer. Lenders are nervous of people pretending to buy to let to get around income multiples.

Annisele

best-of-the-best wrote: »

Hi Annisele, basically she is going to claim from September jointly with my dad, for pension credit(I should have said bit more clear sorry), so when if there is an income it will affect their claim.. but let me know if there is an easier way of doing without loosing any benefit..

I'm not an expert in this area, but I'd be very surprised if her plan works. Essentially she's talking about giving money away in order to get a means tested benefit from the state.

This factshee is a few years old now, but I suspect the relevant bit still stands:

If you deprive yourself of capital in order to get Pension Credit or increase the amount of benefit you get, the Pension Service can treat you as still having that capital (they call this ‘notional capital’). This might occur if you give money away to members of your family or buy expensive items in order to reduce your capital.

I don't know any way to get around that rule. Even if I did, I'd consider it a loophole and want it fixed I'm afraid.

best-of-the-best

I am glad I have asked the help in here, Tomorrow first thing I will be ringing is to my mortgage advisor to get this things confirmed about letting.. one thing however he mentioned is just to tell them that you have given it to family friends.. which is right though, as they are good friends of ours, but we still have arranged it everything legally so we won't have any fall out, so I would rather go properly and get it confirmed with the mortgage advisor..

Tixy

I'd suggest you don't listen to the mortgage advisor on that point. Rent it out with permission or don't do the deal.

Would mother still gift you the equity in the house if she still won't be able to get pension credit? If not then I would get some advice on that side of things before trying to solve the issue of obtaining a buy to let mortgage.