Buying Half a House

Hippymonk

Hi all,
Myself and my partner currently rent a property at a reduced rate that belongs to my elderly aunt. My aunt now lives with her daughter and they want to turn their double garage into a "Granny Flat" for my aunt so need a lump sum of money to help with this. They have asked me if we would like to purchase half the house we now live in (as they know it is unlikely we would get a mortgage for the whole house due to the percentage of the deposit needed). The house we live in has no outstanding Mortgage on it but the banks will not let my aunt remortgage it due to her age and the fact my cousin doesn't have a great credit history,the only other alternative is selling the house which has been in our family for 70 odd years (it was my Nan and Grandads) and we all would prefer to keep it in the family. I have a few questions about this though (Which is the best course of action?).....Would my Aunt have to sell the whole house to us and herself with a Tenancy in Common agreement?or could we get a mortgage on half the house with the deposit being covered by the equity already in the house? (With the same Tenancy in common agreement). Could my Aunt gift us the whole house and then could we remortgage it and give her the money? Could my Aunt sell us the house at a reduced rate so as to gift us the deposit?Is there any other way i haven't thought of?....Any advice would be greatly received and thanks in advance.

xylophone

A gifted deposit might be a possibility but how does your aunt's daughter feel about this?

In addition to this, if your aunt needed to go into care in the future and required Local Authority help with the fees, there might be some question of deprivation of assets.

Hippymonk

Thanks for the reply. My Cousin (Aunt's Daughter) is fine with this and to be honest i hadn't really Given the "going into care in the future" problem a thought but it is my understanding.....and i'm probably wrong....that local authority couldn't really do a fat lot as they can not sell half the house,and if a gifted deposit on the house the sale of which would have been done a long time (hopefully) before her care was needed so would not have been done just to get out of paying care fees. Is there a time limit on this assessment?

G_M

Hippymonk wrote: »

Hi all,

....Would my Aunt have to sell the whole house to us and herself with a Tenancy in Common agreement?
?? You mean you give her half the market value (or 2/3rds?) of the property and it's transferred into joint names (yours, your partner's and Aunt's)?, as TiC? Yes, this could be done provided you have the cash. But see below too.

or could we get a mortgage on half the house with the deposit being covered by the equity already in the house? (With the same Tenancy in common agreement).
No. If Aunt joint owns the property, she'd need to be on the mortgage.
Could my Aunt gift us the whole house and then could we remortgage it and give her the money?
Yes. But a gift is subject to Inheritance Tax (see 7 year rule here). Why not loan you the money which you repay after getting the mortgage. Though would you pay her full market value? Could you get a mortgage for that amount? (No).
You could repay part of the loan and owe the rest to her (and/or her Estate if/when she dies).

Could my Aunt sell us the house at a reduced rate so as to gift us the deposit?
Yes, but see below.
Is there any other way i haven't thought of?....Any advice would be greatly received and thanks in advance.

* consider Capital Gains Tax if she retains part ownership but does not live there
* in fact, CGT may already apply since you rent it from her, she does not live there. Depending on timescale. Check the CGT rules here.
* You need to consider her needs, and also family equality: is it 'fair' if she either sells it to you below market value or gifts all/part of it?
a) Fair to her? it's her money. She may need it, if not now, later.
b) fair to other relatives. Should you benefit more than them? What is her intention regarding her will? Are you the sole Beneficiary (in which case other relatives are irrelevant) or are there other who would lose out?

'Deprivation of Asets' may apply in the future if she needed Care (eg a care home) and applied for Local Authority support. If she had gifted all/part of the property, the LA might well conclude she deliberately/voluntarily reduced her assets, so may not qualify for LA care costs.

Can I clarify the aim here?
1) you wish to free up some cash for Aunt to put towards the granny annexe? How old is she? Have you discussed with an independant mortgage broker? Some (a few) smaller Building Societies will lend to elderly people provided they have the required income etc. She could then remain the owner and use the rent from you to pay the mortgage
(Note: Capital Gains Tax - though if she retains ownership till death CGT does not apply)

2) You wish to keep the property in the family? Has she made a will? Does she have other assets? (ie to cover Inheritance Tax later). I assume she has no civil partner/husband, so nil rate band Inheritance Tax won't apply. Who will inherit on her death?

3) She wants to give away some of her assets? To you specifically? Other family members?

The more one looks at this the more implications arise. If she has no will, I'd advise she talk it through with a good solicitor with experience of wills, inheritance tax planning, Trusts (another possibility to explore!), Care home support etc etc.....

Hippymonk

Thanks for the reply.....how would she go about lending me the money for the house?....am i correct in thinking she would use the property rather than cash thus giving me something to loan against and then us giving her the cash that we have borrowed off the bank.....AAhhh....yes i get it....(Light just went on...lol)

Pixie5740

You really need to go and speak with a mortgage broker.

Yes your aunt can gift you the deposit in the form of equity in the property but it would have to be a gift, not a loan. You would also have to be able to get a mortgage for the remainder.

Have you got any money saved that you could put towards a deposit?

You can't just buy half a property. You have to buy the whole property whether that's by yourself, with other people and/or with a mortgage lender. Mortgage lenders don't like people not named on the mortgage being on the deeds.