Mortgage / loan for two storey extension

Spacebucks

Hi guys, firstly I'm new to the site and apologies if this is in the wrong place. I'm after some advice regarding funding a house extension. Background is that my wife and I have have rented for a long time and we now have two young children. We are going to move to my mothers house next year and would like to add a two storey extension on the back to give all of us more room. The house is owned solely by my mother outright (she is 74) and there is no mortgage on it. My question is what is the best way of my wife and I obtaining funds to build the extension? Both my wife and I work and don't have any loans or card debts. We would be living at my mothers rent free. I'm not sure on the amount we need to borrow but I'm thinking around 60-70k. I have been told I should be added to the deeds as a starting point. My mother is too old for another mortgage and any loan would purely be paid by me and my wife. My wife and I have never had a mortgage. We thought about selling my mothers house and all buying another, but just adding an extension is a lot more of an attractive idea to us for many reasons and the cheaper option it would seem.Any thoughts or advice greatly appreciated. Thanks again

holly_hobby

For you to effect a mortgage on Mums house to fund the extension it will indeed require you/partner to be added to the deeds as joint owner(s), in whats referred to as a transfer of equity.

As there is no existing mortgage, and you won't be providing mum with any capital, assets etc in exchange for ownership - there will also be no stamp duty (SDLT) to pay.

If mums income isn't needed to support the mortgage (mge), then her age may not cause a restricted term with all lenders (whom generally have a max age of 75 yrs at redemption. so you can see the issue in choosing your lender carefully), as there are a few whom will still look at this, inc a couple who have no upper age restriction in any event (income supporting of course). Although it should be noted that Mum as joint owner, will also need to be party to the mortgage (and thereby become legally responsible for the mge with you) so this needs to be considered.

If mum enters long term care and applies for funding, the transfer of equity to you may be cited as deprivation of assets, depending upon when this occurs.

Of course this is all academic if you can't obtain a mortgage and/or planning permission for a 2 storey extension, so you may want to have a prelimarly chat with your local council planning dept to sound this out.

Additionally, if there are any siblings whom will be affected the transfer of equity, you may want to include them in the loop (to save any family fall outs !)

Hope the above basics get the ball rolling - mortgage wise a whole of market mortgage broker will be the best and quickest solution for you.

Holly x

Spacebucks

Hi Holly, thanks for all the useful info. Just as a starting point, is it best to go through a solicitor too add me to the house deeds or can I just go through the land registry? Thanks

holly_hobby

If there is no mortgage then you can do it yourself via land reg - if you contact them they'll advise on the process and forms reqd (don't forget the deprivation of assets etc I've discussed earlier).

If there is a mortgage involved, no matter how small, then the lender will want the transfer of equity administered by a solicitor, with full status checks of all those being added to the deeds/mge.

Here's a link to some of the forms, from memory its TR1 and something else, but if you have a hunt through or ring LR they'll advise - http://www.landregistryservices.com/services/

Hope this helps

Holly x

Spacebucks

Hi Holly, thanks again. One more question I forgot was as the property is way under the inheritance tax threshold, would I ever have to pay it if the property was either transferred into my name or I was just added to the deeds if a future event occurred? I gather IHT is not payable if the property value is under the threshold and my mothers assets would still be way under the threshold. I've been reading forums that aren't that clear on the issue. Thanks

Land_Registry

There should be no need to ring us as we have an online FAQ which explains how to add or remove someone from the register in this way

The FAQ includes links to the forms you may need and the notes to help with their completion. By all means Contact Us us afterwards if there are some aspects that you need help with but do bear in mind that we cannot provide legal advice.

We always recommend seeking legal advice anyway as often there are wider issues to consider around legal ownership.

holly_hobby

Spacebucks wrote: »

Hi Holly, thanks again. One more question I forgot was as the property is way under the inheritance tax threshold, would I ever have to pay it if the property was either transferred into my name or I was just added to the deeds if a future event occurred? I gather IHT is not payable if the property value is under the threshold and my mothers assets would still be way under the threshold. I've been reading forums that aren't that clear on the issue. Thanks

IHT is based on the entire value of the deceaseds estate, which includes property as you say, but all other land, capital and chattels (ie belongings).

If the deceaseds estate exceeds the available nil rate band (currently 325k pp, but possibly upto double the PP nil rate band, if there is unused deceased spousal allowance availabe for tsf).

Whether she tsfs the lot to you or not, it will remain included in the value of her estate, as she will continue living there and the transfer will be classed as a Gift With Reservation.

Hope this helps

Holly