We’d like to remind Forumites to please avoid political debate on the Forum.
This is to keep it a safe and useful space for MoneySaving discussions. Threads that are – or become – political in nature may be removed in line with the Forum’s rules. Thank you for your understanding.
📨 Have you signed up to the Forum's new Email Digest yet? Get a selection of trending threads sent straight to your inbox daily, weekly or monthly!
The Forum now has a brand new text editor, adding a bunch of handy features to use when creating posts. Read more in our how-to guide
Buying parents house and renting back
DocHants
Posts: 111 Forumite
Ive read a couple of threads on here about doing this, and done a little research, but was just after any other thoughts, or things I might be missing...
Due to circumstance and ill health, my mother is not well enough to work for the last 3 years before she receives her pension, due to the Government extending this age several years ago - she missed out by a couple of months! My step father died last year, whom she had been receiving carers benefits for, for many years due to him being of very poor health. Consequently, she does not have any savings of her own, and any benefits she could receive are not enough for her to live off, so the only option is to consider selling her house. This does however seem very extreme if only to tide her over until she can receive her pension.
I am wondering if it is possible for me to buy her house, and essentially rent it back to her, and what the implications of this could be, and what the "best" way to do this would be, or are there any other options available that we just don't know about.
The way I have thought this could work, is for example, the house is worth £100k. Could I say buy this for £90k, with a deposit of say £25k, so a mortgage of £65k
She has worked out that £20k should cover all of her expenses excluding rent until she retires - thus leaving £45k.
If we had a mortgage that would allow unlimited overpayments, we could simply then pay this £45k off, or if not, pay the mortgage on a 1yr deal, then we could re-mortgage after that, using what was remaining as further deposit, so reducing the overall amount. I am aware that once I own the house, if it was ever sold, it would be subject to Capital Gains tax on any profit that was made above the purchase price.
The alternative is to sell the house, rent somewhere @ £500 per month, and see the money dwindle over 10 years or so, then having nothing left!
Essentially, all we are trying to do is give her £20k for 3 years to avoid selling the house. A loan is not an option, nor equity release.. so the above seems the only alternative....
Is this a feasible option??
Due to circumstance and ill health, my mother is not well enough to work for the last 3 years before she receives her pension, due to the Government extending this age several years ago - she missed out by a couple of months! My step father died last year, whom she had been receiving carers benefits for, for many years due to him being of very poor health. Consequently, she does not have any savings of her own, and any benefits she could receive are not enough for her to live off, so the only option is to consider selling her house. This does however seem very extreme if only to tide her over until she can receive her pension.
I am wondering if it is possible for me to buy her house, and essentially rent it back to her, and what the implications of this could be, and what the "best" way to do this would be, or are there any other options available that we just don't know about.
The way I have thought this could work, is for example, the house is worth £100k. Could I say buy this for £90k, with a deposit of say £25k, so a mortgage of £65k
She has worked out that £20k should cover all of her expenses excluding rent until she retires - thus leaving £45k.
If we had a mortgage that would allow unlimited overpayments, we could simply then pay this £45k off, or if not, pay the mortgage on a 1yr deal, then we could re-mortgage after that, using what was remaining as further deposit, so reducing the overall amount. I am aware that once I own the house, if it was ever sold, it would be subject to Capital Gains tax on any profit that was made above the purchase price.
The alternative is to sell the house, rent somewhere @ £500 per month, and see the money dwindle over 10 years or so, then having nothing left!
Essentially, all we are trying to do is give her £20k for 3 years to avoid selling the house. A loan is not an option, nor equity release.. so the above seems the only alternative....
Is this a feasible option??
0
Comments
-
Have you considered giving her the 20k and having it legally set up that it is repaid with interest on sale of the house? This would be the most straight forward solution.:j Trytryagain FLYLADY - SAYE £700 each month Premium Bonds £713 Mortgage Was £100,000@20/6/08 now zilch 21/4/15:beer: WTL - 52 (I'll do it 4 MUM)0
-
If I could I would.. but the only way we can get the deposit together is knowing that we can get it straight back, as Im prob going to have to get a few people on board!
I don't have that much money that I could tie up for so long...0 -
Who's going to pay the mortgage?0
-
We can use the £45k left to repay mortgage, and ultimately lower the payments right down... Once in retirement there will then be funds to carry on with any lower payments, which would be a hell of a lot lower than £500 for rent!0
-
We can use the £45k left to repay mortgage, and ultimately lower the payments right down... Once in retirement there will then be funds to carry on with any lower payments, which would be a hell of a lot lower than £500 for rent!
Have you looked at Support for Mortgage Interest?
https://www.gov.uk/support-for-mortgage-interest/overview0 -
I don't see where the mother benefits in all this? Sounds like she's making herself vulnerable in her retirement for no gain. Does she not get help with the mortgage from benefits?:j Trytryagain FLYLADY - SAYE £700 each month Premium Bonds £713 Mortgage Was £100,000@20/6/08 now zilch 21/4/15:beer: WTL - 52 (I'll do it 4 MUM)0
-
Sorry I am getting confused ??? You are planning to buy your mothers house, charge her rent ? then take the money back to pay off the mortgage. Effectively buying her house for £20,000.
Please google and read Deprivation of Assets.
You seem to be getting confused with regards to who's money it is.0 -
Mum benefits from getting a lump some for her to live off for the next few years without the need to move and rent, costing around £500 per month which would be way above any mortgage repayment costs.
She cant see any other option but to sell her house, and I want to do whatever I can so she can stay there.
Benefits are approx. half of her estimated living costs.. and this is cutting things down to the basics. I did think that her costs were a bit high, but when I looked at them, they cant really be any lower. For example, where she lives doesn't have gas, and over a year, bottled gas is £100 per month, and has been this cost for many years. I was astounded, as I pay £85 for a family of 3 for both gas and elec, she lives on her own!0 -
If I could I would.. but the only way we can get the deposit together is knowing that we can get it straight back, as Im prob going to have to get a few people on board!
I don't have that much money that I could tie up for so long...
Doesn't sound like you can afford to buy the house. In which case if this managed to go through she would be much more vulnerable to homelessness than she is already.:j Trytryagain FLYLADY - SAYE £700 each month Premium Bonds £713 Mortgage Was £100,000@20/6/08 now zilch 21/4/15:beer: WTL - 52 (I'll do it 4 MUM)0 -
Sorry I am getting confused ??? You are planning to buy your mothers house, charge her rent ? then take the money back to pay off the mortgage. Effectively buying her house for £20,000.
Please google and read Deprivation of Assets.
You seem to be getting confused with regards to who's money it is.
The way I see it, the end result is the same...
Her intention has always been to leave the house to me and my sister, I want to make sure she doesn't have to sell and move out. So we buy the house for 90k, she takes the money she needs to live off for next few years, gives us our deposit back, the uses what is left towards the mortgage, anything remaining could then be paid off in much the same way that she would have to pay rent if she sold and moved out, but a lot lower.
Its a bit like doing her own equity release!0
This discussion has been closed.
Confirm your email address to Create Threads and Reply
Categories
- All Categories
- 354.4K Banking & Borrowing
- 254.4K Reduce Debt & Boost Income
- 455.4K Spending & Discounts
- 247.3K Work, Benefits & Business
- 604K Mortgages, Homes & Bills
- 178.4K Life & Family
- 261.5K Travel & Transport
- 1.5M Hobbies & Leisure
- 16K Discuss & Feedback
- 37.7K Read-Only Boards