Tenants in Common Unequal Percentage - help please!

suitcase_of_dreams

Looking for some advice on the following situation:

I live with my mother in her house. The house is currently mortgage free and worth around £850k.

We are going to do some building work (garage conversion/internal renovations) which will be paid for by taking out a mortgage of £100k. this will be a joint mortgage although I will make all repayments (my mother is retired)

We will add me to the deeds as a tenant in common with the intent that my mother and I will live here until she dies, at which point I will sell the property, take my share, and then her share will be split between me and my 2 siblings

What I am struggling with, is how to calculate what share should be mine vs hers.

We imagine that the building works will increase the value of the property somewhat, although it's difficult to estimate by how much. I'm not really looking to 'benefit' from this increase in value though, I basically just want to make sure that I end up in the same position as if I had not taken out the mortgage - ie that I can pay off the mortgage and 'get back' my mortgage payments

Not sure if this makes sense, but does anyone have any advice on how we should go about defining the TIC percentages? And should we also have a separate deed of trust or is that not required if we both have wills?

Can anyone offer any thoughts on best way to approach this?

Many thanks
SoD

TBagpuss

Yes, you need a trust deed.

In terms of calculating the % one option would be to work out the % you are putting in (so, £100K as a % of £850, which is just under 12%)

Assuming the value of the house doesn't reduce,you'll get your investment back, and will get 12% of any increase in value as a result of your investment. You'll be paying interest on the mortgage, you can either look at that as being 'rent' for living in the house or can assume that the increase in value will 'cover' your interest.

AndyGuil

Have the property valued before the modifications then base 100k on that for the percentage.

getmore4less

Have you checked you will get the mortgage.

if you think the 100k investment will add at least that much

Then you have 100/(100+current value).


I would start some IHT planning

Mojisola

Will your mother be able to get a mortgage if she isn't capable of repaying it?

suitcase_of_dreams

yes, mortgage has been offered (broker found us a mortgage provider who was happy to lend to us both on the assumption that I will be making the repayments) - as part of mortgage completion process the deeds need to be changed, hence solicitor asking us what we want to do re TIC and %....

when you say 'start some IHT planning' - what do you mean exactly getmore4less?

thanks for the replies to date, is v helpful,
SoD

Errata

What is your mother's view?

getmore4less

suitcase_of_dreams wrote: »

when you say 'start some IHT planning' - what do you mean exactly getmore4less?,
SoD

When your parent(s) die there will be an estimated tax bill of between £80k to £210k

Some carefull planning can probably get this down towards zero

suitcase_of_dreams

errata - my mother wants to ensure that I do not lose out financially by having paid the mortgage and at the same time wants to ensure that she is being 'fair' to my siblings when it comes to dividing up the estate when she dies

beyond that she doesn't want to be bothered dealing with it all and is leaving it to me to actually make it all happen

getmore4less - presumably we would need to see a financial advisor to make IHT plans? my mother is a widow...

SoD

silvercar

I would include your siblings in your deliberations, to avoid any unpleasantness at a later stage.

Difficult to give you an absolute financial answer as at the moment you are living rent free in your mother's home, albeit in return for greater care and support duties to your mother than your siblings provide.

Mojisola

suitcase_of_dreams wrote: »

)
We will add me to the deeds as a tenant in common with the intent that my mother and I will live here until she dies, at which point I will sell the property, take my share, and then her share will be split between me and my 2 siblings

While this may be possible, allow for the possibility that your mother will need more care than you can provide and has to go into residential care, or that you become unwell yourself, or that you die before your mother, or that one of you finds a partner.

Don't make plans based around one scenario - consider a range of possibilities and think about what would happen.