Buying from Mother In Law - Advice please!

ose

Not sure which category to post this in, but please help....!

Two years ago the opportunity came up to buy the house we rented from our Landlord... As I am self employed, I didnt have sufficient income in my books to get a mortgage, but i didnt want to miss the opportunity to get the house at a great price...170k
To solve the problem my mother in law purchased the house on a buy to let mortgage (135k). For the deposit, I used my money (10k) for part of it, and the rest came from a remortgage (25k) on her property... Very Kind of her I know.....!

Still, every penny has been paid by me, all fees, all mortgage payments and also her remortgage payments.....
The plan was that as my business grew I would have more books and profit to look at, and move towards getting a mortgage of my own with my wife (her daughter)... Business is going great, earning good money, but that is not always reflected in my net profit as I always try to reinvest in the business....

What is the best way forward to try and get the house in my name.... She wants me to do this as soon as I can - shes a bit of a panicker and stresses over things like this....

Now is it best for me to try and join her mortgage and eventually remove her? is this possible? This would mean that the loaned amount (135k) on the buy to let is at a higher rate than a regular mortgage - so not ever so keen on this....

Or could I try to secure a mortgage for the 135k and her simply sell the house to me at this price? i would obviously just continue to pay her remortgage loan, until I could pay it off at a later date....
Is she allowed to sell the property to me at whatever price she likes? and how does a mortgage company view this?
Would I need a deposit like any other mortgage, or would they see that there is lots of equity in the house (the neighbours just sold for 215k - and ours is much better)

My annual earnings on paper are approx 25k - yet my drawings are more like 40k - its just that I am always buying new machinery and vehicles for my business....

It is a complex situation, and therefore any relevant advice or views would be appreciated....

Many Thanks

Pixie5740

What a mess. Whose name(s) are on the deeds for the property? Just you MIL's? Does she have a regulated BTL or just a regular BTL mortgage?

You can't get a joint BTL mortgage for a property you live in. You'll need to get a residential mortgage. Your MIL may also have to pay CGT depending on whether or not the property has gone up in value in the last 2 years and any other investments she has.

Annisele

Does your wife have any income?

Your MiL can sell the property to you for whatever amount she likes (so long as she pays off the mortgage when she does it). If she sells for less than it's worth, then that's a "gifted deposit" or a "concessionary purchase" - but that gets messy if it's MiL to son-in-law. A gift to a daughter (or to a daughter and her husband jointly) is much easier.

And as Pixie says, this whole thing sounds a bit of a mess from a tax perspective.

Mojisola

ose wrote: »

To solve the problem my mother in law purchased the house on a buy to let mortgage (135k). For the deposit, I used my money (10k) for part of it, and the rest came from a remortgage (25k) on her property... Very Kind of her I know.....!

Still, every penny has been paid by me, all fees, all mortgage payments and also her remortgage payments.....

Does your MIL have a will leaving you the house? If not, all your money could end up in someone else's hands if she died before you sort out this mess.

CLAPTON

just to recap
MIL BLT mortgage is 135,000
and her own residential remortgage is 25,000


doesn't seem too bad to me

but everything depends upon what residential mortgage you or you and partner could get?

to buy the house the BTL mortgage must be repaid: does MIL require the 25k as well or could that lie for a while?

whether there is a cgt liability for MIL depends upon the full facts

ose

Thanks so much for your replies guys... I agree it has become a bit of a mess... Fully aware of my exposure financially to MIL... We have a written agreement regarding monies I have put in....
Its her name on the deeds... dont know the difference between a regulated and non regulated BTL Mortgage? therefore dont know whether it is or not.... does this affect it?

Who decides whether the property has gone up in value - at who's discretion? If she wanted to sell at 135k to simply pay off her buy to let mortgage, would this till mean that she was liable to pay capital gains? Because on the face of it she would be making a loss on the property......? why is it more complex gifting a deposit to a son in law? I wanted to do it on my own as wife still has a mortgage in her sole name on a diffent property, from before getting married....
If I bought the property from MIL at this price I guess I would have to pay a whole new set of fees....!

ose

Thanks for your reply Clapton.... She doesnt nescessarily need her remortgage to be repaid, depending on what kind of money I can loan on a mortgage myself.....

Pixie5740

A regulated BTL mortgage is required when a property is let to a family member. Under the current rules a family member, is defined as a parent, brother, sister, child, grandparent or grandchild, of the landlord. It probably doesn't matter any more though if your MIL didn't get the right mortgage.

It's the market rate of the property that is used to calculate CGT, which is not necessarily the same value as your MIL is going to sell the property to you for.

CLAPTON

ose wrote: »

Thanks for your reply Clapton.... She doesnt nescessarily need her remortgage to be repaid, depending on what kind of money I can loan on a mortgage myself.....

the BLT mortgage company would require the mortgage be fully repaid if she sold the property to you : your MIL's view doesn't come into it.
so can you borrow 135k on a residential mortgage?
(and afford the fees etc.