Buying House with Mum Investment?

Topaz99

I am looking at buying a house out-right with no mortgage, and my Mum wants to invest and put in a lump sum of the asking price, as she is looking at a property investment.
I just wondered on the best way of doing this? Is it as simple as her putting in some of her savings, with me, to buy the property ie:

£200,000 asking price
£60,000 - Mum investment contribution
£140,000 - My investment

Therefore my Mum would be putting in a 30% investment. So when I come to sell the property at (hopefully an increase), she gets her 30% share back (which has hopefully also increased in a few years).

I would be living at the property, with my partner who is not purchasing, but will be helping with costs on renovating and help, as it will be our home.
On a second note, would it be wise to put something in legally, in case we split up (awkward i know but haven't mentioned anything yet) just because not only will this be my purchase but my Mum will be involved.

Almost like a 'pre-nup' just in case the worst happens. (We are not married btw), but will be our first house living together.

I am just thinking aloud here way before even making an offer, so is there anything that I am!missing? or need to look at, with regards this type of thing/legally ?

Thank you.

AdrianC

Is your mother just lending you the money, or will she be a joint owner?
If a joint owner, then don't forget the +3% SDLT.
If a loan, then she may wish a charge on the property - but your mortgage lender will need to be happy.

You don't have any deposit of your own...?

Topaz99

Yes I do have the money, to purchase, (we won't be needing a mortgage), it would be an outright buy if it happens.

My Mum would be a joint owner.

Can I ask what the +3% SDLT is? (EDIT: I have just looked up the Stamp Duty Land Tax)

If there is a charge, I suppose we could do this privately just between myself and her?

We are just looking into it, as she has a lump sum and maybe looking at investing in property

aliby21

I think it is a really bad idea. Mum puts in a third, you and your partner spend money renovating, you sell and mum gets a third - how do you take into account the amount you've spent on the house doing it up? I think it would get very messy.

Topaz99

Yes understand, so I was wondering if there was anything in writing to use, before a purchase?

As I'd hate anything to get messy, and would want it all sorted before even contemplating buying.

xylophone

It might be better for your mother to lend you £30,000 and take a first charge on the property.

You could then agree to pay her interest on a rolled up basis until sale (which gives her an income tax liability in the year of receipt) or agree that she will take a percentage of the profit on sale which would give her a CGT liability in the year of receipt.

With regard to your partner who is not contributing to the purchase but will be contributing labour to the DIY project and paying towards expenses, you should have a legal agreement drawn up as to what he might expect on sale/if you split up.

See a solicitor before entering into any arrangement.

[Deleted User]

Why is your partner going to spend time and money renovating a property they don't own and will not receive any share of profits when it is sold? Sounds very much like having your cake and eating it.

davidmcn

There are 1001 other (less complicated and possibly more reliable) things your mum could invest her money in - why your house? Do you need her money for the purchase?

steampowered

If your mum wants to invest in property, she would be best off doing that through a Real Estate Investment Trust - rather than giving the money to you where she will have greater tax liability and no liquidity to her investment.

If your mum is doing it to help you out, then that's fine. But as others have advised there are tax considerations.

Your partner may well have a legal claim on the property if you split up and he is invested into it, but that may be a bridge you'd have to cross at the time.

G_M

Looks like the OP cannot get, or does not want to get, a mortgage. Hence the plan to make a cash purchase supplementing his own cash with mum's.


As others have said:
1) if it's a joint purchase
* you and mum both on the Title Deeds
* as it's a 2nd property for mum, the 3% Additional SDLT will be payable
* as (I assume) it will not be mum's main residence, she may have to pay Capital Gains Tax if/when the property is sold
* but mum's investment is safe, locked up in her own jointly owned property
* she'll benefit from any increase in value proportionately
* you should own as 'Tenants In Common', (see here) with a Deed specifying the % shares


2) if it's a loan
* she gives you the cash - to be repaid at a later date
* you could be charged interest, or not- to be agreed
* it would be wise to write it all down, including when and how the loan would be repaid (esp what if she wanted her money back before you sell)
* she could place a charge on the property - forcing you to repay her when you sell - this might make your next purchase dificult!