Can we move into my mother in laws house and she move into ours?

kate020385

My husband and I are looking to move closer to our families. My mother in law owns a large house that is currently let out. At the minute she is still living in her ex partners home after a recent split but needs to move out. Her large house is too big for her on her own and we are looking to move from our 2 bed semi into something larger. What we are thinking is if we move into her home where we would live rent free as the mortgage is paid, and then we would take out a mortgage on a smaller 2 bed house which she would live in. we would then pay the mortgage on her smaller home and the household bill on our larger home. And she would only pay household bills on the home we buy for her. That way she still remains mortgage free .

The only things we want to remain is that we still want the large house to be in her name and ultimately still belong to her. Likewise the smaller home that she will occupy will be in our name but she will occupy it.

My question is, is it possible to live in someone else's home rent free? How do we go about it? Are there any legal issues in this plan we may not have thought about? We do want to at some point see a solicitor and have an official contract drawn up to avoid any issues in the future.

This is in Scotland by the way so I know the law differs.

Thanks for your time!

Pixie5740

Yes, it's possible to live in someone else's home rent free. I'm not sure how you would go about getting a mortgage for a property that you won't be living in though. I don't think you would be eligible for a resendential mortgage since you won't be living in the property and if you're not going to be charging rent I don't know if you'd be eligible for a BTL (regulated or otherwise) mortgage so I think it's something you'd need to discuss with a mortgage broker to see if it's possible.

The property you buy will also be subject to CGT if/when you ever come to sell it.

You'd also need to consider who would be liable for the repairs and maintenance on the properties, the occupier or the person on the deeds.

Cornucopia

If this were England, I'd probably suggest actually selling the properties to each other. This is a relatively simple transaction and resolves all of the financial, ownership and tax implications at the outset.

Not sure if being in Scotland makes a difference.

davidmcn

kate020385 wrote: »

The only things we want to remain is that we still want the large house to be in her name and ultimately still belong to her. Likewise the smaller home that she will occupy will be in our name but she will occupy it.

Why? This is the bit which makes what you are proposing rather complicated!

kate020385

Not really keen to sell only because the large house is my mother in laws only asset and I dont really want to tke that off her or for her to think we're trying to get our hands on it as it is a mutual agreement. If we bought it off her we'd be buying it at a fraction of the market value as we just wouldnt be able to afford it otherwise. We did think about buying it at a reduced rate and the she could buy a house with the proceeds but it means that we then own a £400,000 house and she would only own a £170,000 house. neither of us is planning to be leaving these houses for the foreseable future. We are hoping to make it our forever home but you never know whats around the corner and if we did decide to sell we (morally) would be obliged to give her the rest of what the house was worth at the time we bought it. I know we wouldnt legally be obliged as the house would then be ours to what we like with but its not really a road we want to go down?

Yes i was also thinking about how we go about buying a house to let her live in because of the type of mortgage needed? I need some professional advice on this.

So far, every solution seems to turn up a new issue?? lol

kate020385

David, my husband is unwilling (as I am but less so) to make her change the house into our name. Her house is worth £400,000 + we can only afford up to £170,000 so we would be leaving her with a lot less in terms of assets if we have our own names on the houses we occupy. Because she has recently split up from her partner and no longer works, we dont want to leave her with nothing to her name (or at least a lot less than she has now) Hope that makes sense?

fishpond

It makes perfect sense.

Pixie5740

This doesn't help you, but would your MiL not be better off selling the house and buying a smaller property outright rather than having all her money tied up in an illiquid asset?

kate020385

pixie 5740 Yes we thought of this too but she says she doesnt want to sell it because while she still has the house it is increasing in value and making her money but if she sells she will end up living off the profits which will obviously leave her with less and less money over time. she is on 53 so still a long time to live of the profits, im not sure the money would go very far. I can see her reasoning but on the flip side, its not as if shes going to come and sell the house from under us as a retirement fund as we would build this into a contract to avoid either of us from kicking the other out. problem with that us onbviously if she owns the house she can kick us out if she likes just like we would be able to do the same with her. This is what worries me about the situation. Im not sure if such a contract can be agreed legally???

MarkBargain

What about if your mother-in-law needs a nursing home in future? Isn't there a risk the state would require the sale of her £400K house to pay care costs, despite you living in it?

Mojisola

kate020385 wrote: »

I can see her reasoning but on the flip side, its not as if shes going to come and sell the house from under us as a retirement fund as we would build this into a contract to avoid either of us from kicking the other out.

Would you get a mortgage on a property that you aren't going to live in when you're going to sign paperwork to say that your tenant cannot be forced out?