Using Mother's money to buy a house, possible?

LittleBear

Hello,
I wasn't sure which subforum to post this in and also wasn't sure what to have as a thread title as my question is rather vague, sorry in advance!

My mother (aged 60) has several hundred thousand pounds in savings following separation . As she only has a very small private pension and a state pension, this is to be her source of income on retirement - it is currently invested in various ways via her IFA. Enough could be "freed up" from whatever it is tied up in in the next couple of years.

My husband and I privately rent currently at £550pcm. I am long term unwell and unable to work, my husband is in full time employment on a salary of £26k.

We have £9k in savings. A modest house around here would be £150k.

My Mum has really kindly said that it seems crazy for her to be sitting on so much money when we are stuck renting and that if there is a way for her to be able to help us buy a house but to still make money from her money as it will be her pension. Does that make sense? Either deposit wise or the house.

Is there a way? I know that this is not an empty offer.

Sorry for such a vague question. It may very well be that we are lacking in logic but any advice or information would be helpful.

Thank you

Hoploz

She can gift it to you. Either the full amount to buy, in which case she says goodbye to the money, or just a deposit and you mortgage the rest yourselves.

Mojisola

She could lend it to you.

Get a properly drawn-up agreement covering what she's lending you, how it's going to be paid back, what happens if you stop paying/you die/she dies.

TrickyDicky101

Is her money tied up in a drawdown pension? If so, there would be tax consequences to taking it out of the pension wrapper.

Does she want to buy you the house and become your landlady (charging you rent)?

LittleBear

TrickyDicky101 wrote: »

Is her money tied up in a drawdown pension? If so, there would be tax consequences to taking it out of the pension wrapper.

Does she want to buy you the house and become your landlady (charging you rent)?

No, her money is not in a draw down pension. She purposefully wanted it to be semi accessible.

She doesn't really know how to best help us -but the end goal would be for my husband and I to own a home. Sorry for being so vague, this really is at the "I want to help you, but how?!" stage! X

booksurr

LittleBear wrote: »

Enough could be "freed up" from whatever it is tied up in in the next couple of years.

My husband and I privately rent currently at £550pcm. I am long term unwell and unable to work, my husband is in full time employment on a salary of £26k.

We have £9k in savings. A modest house around here would be £150k.

I presume what you are simply asking is could your mother buy your current (or another) property and you pay her rent which would be at least or more than she is currently getting from her investments

the answer is - it depends!

1. yes she can spend her money however she wants to if it can be "freed up" without penalty

2. 550pcm rent is a gross yield of 4.4% on a property costing £150k. What is her current investment rate of return ?

3. mother would have various costs to meet as a landlord. They will reduce that yield by a little bit (big bit if she does need a mortgage )

4. if you are reliant on benefits to top up your income so you can pay the rent there is nothing legally stopping you still claiming benefits for a property you live in that is owned by your mother but there are some complications ("contrived tenancy")- your mother would have to deal with them if they arise. Does she really want to be a LL given she has no idea what that entails legally?

xylophone

As your mother wishes to help you buy a property but also to make a return from her money, the logical answer is for her to make you a loan at an agreed rate of interest.

It would be as well for you and your husband to take out life assurance that would repay the loan in the event of your death/s before the loan was fully repaid.

In effect your mother would be your mortgagee. She would need to report the interest on her tax return.

Make sure that you have a properly drawn and witnessed agreement.

Your mother might wish to consider "forgiving" a certain amount each year by way of gift?

http://www.hmrc.gov.uk/inheritancetax/pass-money-property/exempt-gifts.htm

gibson1

She could buy the house in her name, and then rent it to you. That way she'd be making money from her money, even if the rent she charges is very low.

She could give you the money, or buy the house and give you the house.

Something to consider is inheritance tax. If she were to gift it to you, its taxable for 7 years, getting less as the 7 years gos by. If she were to have money or a house in her name, it gets taxed by 40% after £325,00.