Can I buy into a mortgage free house?

Househunting19

Hi,
I have a dip for £170,000, my Nan is mortgage free and has a house worth £310,000. The house would be ideal for my family as it’s larger than our current house which we private rent. My Nan has asked me if it’s possible we buy as much of her house as possible then buy the rest at a later date which we would agree on if it was possible. My husband has his own company which is making a profit year on year so we would hope to buy the rest of the house within 5 years. We could also save money in our isa to help. My Nan will be moving in with her daughter (my auntie) and putting her house on the market in the summer but wanted to give us first refusal. Does anyone know if this is possible? Thanks I’m advance.

getmore4less

How much does your nan need now?

Could she be your lender?

Househunting19

Ideally she’d like as much as we could give her upfront so she could pay off my aunties mortgage and have a good amount left for holidays and everyday living.

getmore4less

Is she buying into the house she will be living in?

Househunting19

Yes she is. I’m not sure if that can cause problems with tax etc so need to look into it all before deciding what to do.

enthusiasticsaver

If you are getting a mortgage for a property there is no leeway for paying for the property in stages. Your nan can sell it to you for £170k and trust you will give her the extra money in the next few years. The bank will normally insist the mortgage and property are both in your names although I have read on here there are a few lenders which will allow it so if you find a lender willing to have three names on the property but only two on the mortgage that might be a possibility. I think you need some legal advice on the practicalities and implications of this though.

AnotherJoe

I think you could do this.
Here's what you'd do. Let's keep it easy, the house is worth £310k and you take out a mortgage for 50% which fits with what you've been told you can borrow, and are the owner.
Your nan takes a charge over the house for the other 50%.
You can pay back your nan her 50% over time.
The downside is mostly for your nan, half her money is tied up in the house.
Also, not many lenders will do this, you'd need a broker.

enthusiasticsaver

If you already have a property be aware you will be classed as buying this as a second home so stamp duty will be double. If you are planning on keeping your existing property as well that may need to be a BTL (buy to let) mortgage rather than residential and there may be CGT and IHT to consider as well especially if your gran dies within 7 years as the remaining equity of the property will be seen as a PET. (Potentially exempt transfer or gift).


I second Another Joes suggestion to contact a broker as not all lenders will agree to second charges.

getmore4less

If it is done with a loan from nan(with second charge) there is no IHT issue, no gift, no PET, no 7 years

If nan dies they just have an outstanding debt to her estate the terms of the loan should cover what happens if that happens during the load term.

Househunting19

Thank you for all your advice so far. It’s obviously a lot of money for my Nan to think about so I’ll see what she thinks.