Buying Parents Home

James_d_4

So I have a complicated situation and don't really know where to go for advice.

My mum is currently living in the family home on her own but due to a change in circumstances is struggling to pay her mortgage, my sister is in rented accommodation with a young family but doesn't have a deposit to buy.

Property Value - £85,000
Outstanding Mortgage - £25,000

My mum has asked if I would be prepared to buy out her mortgage and free up some cash to do some repairs and give my sister enough for a deposit. I am in a position to do this but not sure about IHT and capital gains.

New Mortgage - £65,000

Clear Mortgage - £25, 000
Deposit for Sister - £20, 000
Repairs to Property - £10, 000
Clear some of my own debt - £10, 000

The above figures are agreeable to everyone and my mum would stay rent free or perhaps a token amount each month.

Does this sound anyway reasonable, think I really need to speak to a financial advisor and see what the best course of action would be.

notanewuser

No no no no no. Your mother staying in the house after she's sold it is a massive massive problem. The no rent is a massive problem. A residential mortgage is a massive problem as you're basically becoming a landlord. Your mum giving away her money could be a massive problem if she needs care or benefits in due course.

James_d_4

Can you elaborate on why they are massive problems?

Is it legal, tax, family issues? She lives in Scotland and is approaching retirement age if it makes any difference.

antrobus

If you buy the property at market value there are no IHT implications. And I can't see that IHT would be an issue anyway if all your mother has is a £65k house.

If you buy the property and you don't live in it, you'll be liable for CGT on any profit made on eventual sale.

If you buy the property and your mother then gives both you and your sister £20k each, then that could be an issue if your mother contemplates claiming any means tested benefits post-retirement e.g. Pension Credit. It might possibly be an issue if your mother was to require residential care in the future, but so long as your mother is currently in good health, that wouldn't be a serious issue.

Your biggest problem might be getting a mortgage. You won't be eligible for a standard residential mortgage because you don't intend living in the property, and it's not a BTL because there's no let.

pmlindyloo

James_d wrote: »

So I have a complicated situation and don't really know where to go for advice.

My mum is currently living in the family home on her own but due to a change in circumstances is struggling to pay her mortgage, my sister is in rented accommodation with a young family but doesn't have a deposit to buy.

Property Value - £85,000
Outstanding Mortgage - £25,000

My mum has asked if I would be prepared to buy out her mortgage and free up some cash to do some repairs and give my sister enough for a deposit. I am in a position to do this but not sure about IHT and capital gains.

New Mortgage - £65,000

Clear Mortgage - £25, 000
Deposit for Sister - £20, 000
Repairs to Property - £10, 000
Clear some of my own debt - £10, 000

The above figures are agreeable to everyone and my mum would stay rent free or perhaps a token amount each month.

Does this sound anyway reasonable, think I really need to speak to a financial advisor and see what the best course of action would be.

Am I misunderstanding this?

When you say a new mortgage, do you mean you are going to take out another mortgage on your own place and use the cash as indicated above? Giving your mother cash for her to pay off her mortgage and do some repairs and giving your sister money for a deposit for a house and paying off your debt?

Or is it something different?

James_d_4

pmlindyloo wrote: »

Am I misunderstanding this?

When you say a new mortgage, do you mean you are going to take out another mortgage on your own place and use the cash as indicated above? Giving your mother cash for her to pay off her mortgage and do some repairs and giving your sister money for a deposit for a house and paying off your debt?

Or is it something different?

I would be taking out a mortgage to buy my mothers house.

notanewuser

James_d wrote: »

I would be taking out a mortgage to buy my mothers house.

What kind of mortgage? Can't be residential, because you won't be living there. Can't be BTL because you won't be getting any rent.

James_d_4

Obviously more to think about than I realised.

Thanks

kingstreet

You buy the property from her;-

- she can't continue to live in the property if you want to go the "gifted equity/family purchase at undervalue" route

- a buy to let mortgage would be "regulated" if you intend to let to a family member and there are few lenders offering such an option.

You do a transfer of equity into joint names and remortgage into joint names;-

- her age/income/credit history will be taken into account, possibly leaving you only able to get a mortgage until her retirement age.

She gives away equity;-

- possible deprivation of assets if she needs council-funded social care in future.

You really need to seek professional advice on such an arrangement.