Parents divorcing, buy half the house?

seekingadvice2

My parents are getting divorced. They own their house outright, and it is worth circa £250 000. My mother wishes to stay in the house while my father departs and to do so she would have to buy his half of the house. However she has no regular source of income.

Is it possible for me to raise a mortgage, somehow using my mothers half of the house as a deposit, in order to buy my fathers half. Or am I simply going to need a cash deposit (which I do not have) in order to buy the half of the house?

I do not own any property of my own and earn circa £27000 p.a. I am also gloriously(or rather, unfortunately) ignorant of the in and outs of mortgages. I would be grateful for any advice on here! Thank you.

holly_hobby

If Mum wishes to remain in the property, has in sufficient income to pay dad off, and she's too young or doesn't want to consider a Lifetime Equity release mortgage (which isn't based on Mum's income, but her age (min 55) of the mortgagor and property value), then you are looking at a simultaneous transfer of equity (Dad off and you on) and equity release remortgage.

Mum has to remain on the deedsand be party to the mortgage because she is to remain resident post completion (which is why you need a remortgage), but as her income wont' be reqd for the mge affordability you zhould be able to circumvent the max redemeption age criteria/restricted term with several lenders.

You're looking at a lender whom will accept an unencumbered remortgage (lots about) and the reason for the eq release (pay off partner, which isn't usually a prob), and you are looking at a income mulitple of just over 4 x (net of commitments) income - BUT with a ltv at 50%, I think they'll be plenty of options with various lenders.

At a reqd mge (classed as consideration) of 125k you'll just come under the SDLT nil rate threshold, so no stamp duty for you.

However, whilst SDLT is based on the actual consideration (in this case sum reqd to buy Dad out), CGT where the parties are connected is based on the actual market value (or his share in this case). Which means that if Dad has been absent from the home for a period in excess of 36 mths, there may well be some CGT exposure for him, dependant upon his share of market gain and available reliefs/exemptions. (but thats for him to address).

Speak to a whole of market broker, whom having considered your financial circs and requirements will offer placemet solutions re a mge for you and Mum.

One thing I need to make clear, even though Mums income is not reqd for the mge, as she will need to be party to the arrangement (as she is a legal owner), she will also be fully and legally responsible for servicing the mortgage along with you ie should you be unable to meet payments - so you need to make sure she understands the legal and financial implications of this.

She also needs to be aware that once you're on the deeds, the property will be exposed to your creditors (again in the event of any default, but only upto your effective share).

You may want to hold the property under a joint tenancy arrangement, which gives automatic equal and total ownership, which will ensure automatic legal transfer to you on Mums passing (or the other way round !). Or you may wish to hold as tenants in common, where your ownership may be unequal ie 99/1 or whatever, is effectively ringfenced, and although no automatic tsf of equity on death to the surviving owner, you may bequeath your share to each other or indeed anyone else !

I would also take note that when you sell the house (if not your primary residence at any time), you will be exposed to CGT on any gain to your already owned share ie 50% if joint tenants, or a lesser amount if held as tenants in common - so you may want to discuss with your conveyencer whether holding as TIC may be best served if you never intend to live in the property pre its eventual disposal.

I would strongly recommend life cover on you, written in trust for Mum, at least equal to the mge debt, as if you pass before her, she's going to be a bit stuffed in continuing the mge without your income.

Above are just the very basics, lots to consider, I would expect your mortgage broker and solicitor to walk you through this in detail -and if Mum and Dad are only separated and not divorced (or planning to divorce), please ensure that Mum/you (esp if you have no dependants) both effect a new will, to ensure that if the property is held as tenants in common, Dad won't continue to benefit from her/your estate on your earlier death ( if of course thats what you want).

Apologies for length of post, as lots to try and raise for your consideration, but hope this helps get the ball rolling ....

Holly x

CLAPTON

what are your future plans?

do you intend to move in with your mother?

if no
-then can you afford your rent and paying a mortgage?
-what would happen if you want to buy your own place as you will then need to pay two mortgages?

if yes
-then what happens if you meet some-one and want to go live with them?
-want to move away?

and many more considerations depending upon her and your age, general financial situation , other siblings etc.

seekingadvice2

Holly - Thank you very much for your response, it is much more comprehensive than I expected and has been very helpful!

Clapton - I wouldn't be living with my mother, I rent a property about 500 miles away from her with my girlfriend. The points you raised are pretty much my concerns. Ultimately I could afford the rent and the mortgage if she contributed too.

dimbo61

Hope you are happy renting long term and have no plans to buy!
At 4% over 25 years your £125,000 mortgage will cost £660 a month.
Can you afford that every month ?
Does Mum NEED a £250K property ? What 4 bedroom detached
If she sold up now the selling costs would come out of the balance before Mum and Dad get 50/50 of the equity.
How old is Mum? Has she considered over 55,s sheltered living either buying or renting

Annisele

Does your father have any assets - including a pension?

I ask because pensions can easily be worth more than £125k.

laurel7172

Annisele wrote: »

Does your father have any assets - including a pension?

I ask because pensions can easily be worth more than £125k.

Absolutely. Make sure mum sees a solicitor and doesn't sign anything without her own independent legal advice.