Help Please Remortgage Or Interest-Only Equity or something else?

starchild85

Hello

This is a long winded situation so I will try and make it as understandable as possible.

I currently own half of my mums house and am due to have a baby. I am not working as I have just started a year out of Uni and I cannot claim any benefits - because I have not yet had the baby, but also because I don't qualify for some due to owning half of my mums house.

I am 29 years old, my partner is 32 years old and my mum is 66 years old.

My partner is self-employed and for the last 3 years his income has been around £17500 per year...we currently have around £7000 in savings.

My mothers house is worth £1.2 mil (it's in London). She is also self employed and last year her wages were circa £12000. The mortgage has very little left to pay (under £7000).

It looks although if we get a mortgage in my partners name we won't be able to afford anything in London (or within a 45 min commute).

I can't live with my mum forever as we don't get on and she works from home which does not really fit in with having a new born baby and new family to run.

My question is: can my mum and my partner apply for a remortgage of the house together in order for us to get a mortgage? Or can my mum straight apply considering we have a generous amount of equity? Or should we opt for a interest-only lifetime (equity) mortgage? I know that I would have to take myself of the deeds in order to get an equity mortgage.

I think in the long run we will end up paying a lot more for the equity mortgage....also, the most we can afford to get out of the equity mortgage (whilst only my partner is in employment) is £200,000 which we can't find much in London for - apart from auction properties which we are willing to look at.

We were thinking of buying a houseboat and living on that, but they don't look like very good investments - does anyone have any advice about houseboats? We know they have to be taken out of the water and worked on every 7 years and moorings are hard to come by in London, but are they really not ever sold at the bought price or above? Esp. if well looked after and fitted out (my partner is a builder by trade, so we'll be able to look after it/do it up).

Or, are there any other suggestions? (my mum does not want to sell up...she's been living in the house for 30 years and works from it...so it would be a very last resort and that is if she would really commit to moving).

Thanks

TrickyDicky101

I am not a broker so my view is limited to my own experience and opinion.

I would start trying to talk your mother into moving. You have £600k tied up in the house that could purchase you a decent property (even in London). Same for her.

Whilst you remain on the title, equity release is unlikely to be an option (or only at very low levels) and is a very expensive form of financing.

Giving up title is a bad idea.

silvercar

My question is: can my mum and my partner apply for a remortgage of the house together in order for us to get a mortgage? Or can my mum straight apply considering we have a generous amount of equity? Or should we opt for a interest-only lifetime (equity) mortgage? I know that I would have to take myself of the deeds in order to get an equity mortgage.

The names on the mortgage need to match the names on the deeds. So if you wanted a 3-way mortgage you would need to add partner to the deeds.

If you and your Mum applied, you would be limited by your earnings.

I think you need to consider selling up if you can't live together. Your Mum is young, can you face living with her for 20 years?

Why is all the post about you moving out and being stuck with no way of affording a decent sized property? You own 50% of the house, maybe your Mum could move out of your joint home.

getmore4less

There is probably a nasty IHT bill looming.

How did you get your 1/2?

If it was from your dad with mum having a life interest then that will reduce the transferable nil rate band so potential tax bill of £110k.

silvercar

getmore4less wrote: »

There is probably a nasty IHT bill looming.

How did you get your 1/2?

If it was from your dad with mum having a life interest then that will reduce the transferable nil rate band so potential tax bill of £110k.

If OP is living there (and always has done on ownership) it is her PPR and exempt from CGT on sale.

Life interest would only apply if OP owned the whole property with Mum having a life interest to occupy. I don't see that Mum has a life interest on OP's half if OP is living there. The danger comes if OP moves out and Mum is then exercising her life interest over that, but as a joint owner that may not be the case.

getmore4less

silvercar wrote: »

If OP is living there (and always has done on ownership) it is her PPR and exempt from CGT on sale.

Life interest would only apply if OP owned the whole property with Mum having a life interest to occupy. I don't see that Mum has a life interest on OP's half if OP is living there. The danger comes if OP moves out and Mum is then exercising her life interest over that, but as a joint owner that may not be the case.

very common senario is parent dies giving the house to the kids in trust with life interest to spouse.

The kids see the benificial interets as owning and not uncommon for them to become joint legal owners as well.

Living in the place may not be relevent/red herring as the life interest give CGT relief anyway.

The true ownership may well be very relevent if this was an inhertance and still really a life interst trust, the OP may not be able to raise a mortgage anyway.

Let_Us_See

starchild85 wrote: »

I currently own half of my mums house

No you don't, you own half of a house (or even your mother owns half of your house)!

Lots of ideas, but really the only workable options is to sell and divide equity and buy your own homes. If this happens please consider taking the appropriate action to protect your equity in any future joint mortgage with your partner.

starchild85

silvercar wrote: »

The names on the mortgage need to match the names on the deeds. So if you wanted a 3-way mortgage you would need to add partner to the deeds.

If you and your Mum applied, you would be limited by your earnings.

I think you need to consider selling up if you can't live together. Your Mum is young, can you face living with her for 20 years?

Why is all the post about you moving out and being stuck with no way of affording a decent sized property? You own 50% of the house, maybe your Mum could move out of your joint home.

Because my mum won't sell up and I can't force her too...and I also can't force her to move out. Hence why the questions about remortgaging and equity. It is very frustrating because she really won't move...she only but me on the deeds to avoid inheritance tax but she did so without seeking expert advice and now its all gone against me as I can't apply for council housing but also can't afford private rent.

starchild85

getmore4less wrote: »

There is probably a nasty IHT bill looming.

How did you get your 1/2?

If it was from your dad with mum having a life interest then that will reduce the transferable nil rate band so potential tax bill of £110k.

My mum put me on the deeds to avoid IHT but my dad died when I was 15 (13 years ago) and he was removed from the property deeds when I was around 8 after they divorced so in 1993 so I don't think his inheritance allowance will make a difference.

That is a highlight of getting equity out of the house...it reduces the IHT

dimbo61

Hello,
Welcome to living in London,
You and mum, the baby and your partner will have to get used to living together.
If you sold the property you could move to the countryside, buy a big four bed detached house for £300,000 and have £300,000 in the bank.
Mum could buy a stunning bungalow for £250/300K and have a very nice nest egg to live on.
Why do you have to live in London ?

starchild85

Hmmm, doesn't seem to be much maneuver space, I suppose the problem is that my mum doesn't really see the property as half mine and she sees herself as very old and not willing to move. She sees it as only half mine after she dies as opposed to now...

Feeling a bit deflated as there are 2 lodgers living here and because I moved back in unexpectedly I am living in the office...feel like I don't mean very much to my family!

The only option to get her to move would be legally...and I think I have less ground legally than her in this case (she's been on the deeds for 30 years, I've been on them for 2/3).