Rent from Mother in Law

colman12

Zero tax liability is the desired outcome, or at least low, because as say you can only claim the interest element of the mortgage. Not trying to engineer losses.

My thoughts are, and happy to receive corrections on this are:

We opt to be tenants in common, which means we can specify the specific % of ownership of the property.

If my wife owns 99% of the property, I would have thought £100 of rental income, would be allocated £99 to her and £1 to me and that would drive the tax obligations.

The mortgage will sit with my wife and I, which is fully funded by the mother in law.

colman12

DumbMuscle wrote: »

So you have a mortgage offer, and the mortgage company is aware that you will not be living there and will be renting to your mother? Check the mortgage offer terms to make sure they cover your situation. At that point, what "type" of mortgage it is doesn't matter, and you're OK.


A few minor questions, for which the answers aren't all that important so long as your wife and your MIL agree what they are.

• What will happen to the rent once the mortgage is paid off? - the rent would
• What about when the mortgage payments/ground rent change (e.g. end of a fix)?
• What about fees for remortgaging?
• Will you give your MIL the option of overpaying to get the mortgage paid off sooner?

It is repayment, by the time the mortgage is repaid, the MIL would no longer be working and there would be no rent, as we would cover all of the costs.

If we can overpay, we will. Any future remortgage fees will be covered by the family.

00ec25

colman12 wrote: »

Zero tax liability is the desired outcome, or at least low, because as say you can only claim the interest element of the mortgage. Not trying to engineer losses.

My thoughts are, and happy to receive corrections on this are:

We opt to be tenants in common, which means we can specify the specific % of ownership of the property.

If my wife owns 99% of the property, I would have thought £100 of rental income, would be allocated £99 to her and £1 to me and that would drive the tax obligations.

The mortgage will sit with my wife and I, which is fully funded by the mother in law.

your thoughts are fine, TIC is the only way to go given your circumstances. 99/1 is then the "usual" way to do it.

G_M

colman12 wrote: »

I don't think it is called a BTL, as you can't have a family member living there. This would be deemed a second residential mortgage.

We are a matter of days away from exchange. But i thought about this issue on "renting" it to her. I think structure the ownership in this manner is the most efficient thing I can do.

Don't want to flog a dead horse but...

Is the lender aware you will not be using this as a 2nd home, but letting it to a family member (in return for rent)?

If yes, fine. But if they are assuming it's a 2nd home (as " second residential mortgage" implies) then you may well be in breach of your mortgage terms.

Insurers also will need to be aware of the distinction.

Mojisola

Have you worked out what would happen to the property (and the arrangement with MIL) if the two of you die before her?

colman12

Lender is aware, as we have to get occupier consent forms signed etc. Solicitor is fully aware that we purchasing this property with the sole purpose of my MIL living in it.

We will have life insurance to clear the mortgage in the event that both of us die.

Thanks for all the useful thoughts and questions.