Advice needed purchasing/renting property for my Mother to live in

itneverends

Hi,

Background:
-My Mother (60) is married but currently working with a solicitor to obtain a financial separation agreement, divorce possible at a later stage
-2 Children now Adults (No longer at home)
-Their home is now sale agreed for £180,000 with no outstanding mortgage.
-Earns approx £900 per month, made up of us paying her to help with child care and a part time job. Pay expected to rise to £1200 - £1500 IF an agreement is made with the separation. This will be made up by 50% of my Fathers numerous pensions
-No savings
-No pension

The problem:
Given that she will be getting 90K minus fees. There is no apartments around our extended area going less than 110K. Any that are usually are in need of a great deal of work. With her age and low income, getting a sole mortgage is not an option. They have agreed to leave their current house by early December!

Option 1:
We found an ideal apartment for her close by to me which was on the market for £125,000, immaculate condition and ready to move in to(she has put an offer on it, accepted). I had thought about the idea of my Mother gifting me approx 80K and I use this as a deposit on the property and take on the mortgage myself with my partner. This will not be a buy to let but rather a second property that I own which she will live in.

I understand there will be added SDLT of 3% (Northern Ireland) and that my Mother is taking a risk by essentially giving me everything she owns. Once the settlement agreement happens she will be giving me the mortgage payment. However, should she not be fit to work later down the line, I will be able to absorb this payment if I need to. She has sought legal advice on the matter, however I wanted to know is there anything else I need to watch out for regarding this?

Option 2:
My Mother moves in with me and my partner temporarily (not ideal) while the financial settlement happens. Once that happens her income will be greater and she will be able to look at the option of renting a small 1 bed apartment for approx £450 - £500. Put 5K aside for Emergency fund and split the 85K remainder over two tax years and add to a pension/SIPP to get the 20% relief then decide later when to start drawing down on that. This way none of the capital is getting used up front and in theory she wouldn't need to dip in to it for renting. Her outgoings are very low and no debts, so subject to me scrutinizing her budget I/we think she could get by on her revised income and renting whilst keeping the 85K. She has no plans on retiring early.

Although trying get her out of the mindset "Renting is a waste of money" and "The house will be your inheritance" is proving difficult!

I'm torn between these two options although she has her heart set on option 1 and she has already 'deal agreed' with the apartment. But honestly, I'm reluctant to take on an additional mortgage in my name, which may also hinder our plans to extend on our own later down the line for much needed improvements. Not to mention the additional stress of it all. We have enough going on in our own lives as it is!

Any opinions / advice would be greatly appreciated! Including any options I may have not even considered.

Thank you

Comms69

itneverends wrote: »

Hi,

Background:
-My Mother (60) is married but currently working with a solicitor to obtain a financial separation agreement, divorce possible at a later stage
-2 Children now Adults (No longer at home)
-Their home is now sale agreed for £180,000 with no outstanding mortgage.
-Earns approx £900 per month, made up of us paying her to help with child care and a part time job. Pay expected to rise to £1200 - £1500 IF an agreement is made with the separation. This will be made up by 50% of my Fathers numerous pensions
-No savings
-No pension

The problem:
Given that she will be getting 90K minus fees. There is no apartments around our extended area going less than 110K. Any that are usually are in need of a great deal of work. With her age and low income, getting a sole mortgage is not an option. They have agreed to leave their current house by early December!

Option 1:
We found an ideal apartment for her close by to me which was on the market for £125,000, immaculate condition and ready to move in to(she has put an offer on it, accepted). I had thought about the idea of my Mother gifting me approx 80K and I use this as a deposit on the property and take on the mortgage myself with my partner. This will not be a buy to let but rather a second property that I own which she will live in.

I understand there will be added SDLT of 3% (Northern Ireland) and that my Mother is taking a risk by essentially giving me everything she owns. Once the settlement agreement happens she will be giving me the mortgage payment. However, should she not be fit to work later down the line, I will be able to absorb this payment if I need to. She has sought legal advice on the matter, however I wanted to know is there anything else I need to watch out for regarding this? - But that is a BTL??..

Option 2:
My Mother moves in with me and my partner temporarily (not ideal) while the financial settlement happens. Once that happens her income will be greater and she will be able to look at the option of renting a small 1 bed apartment for approx £450 - £500. Put 5K aside for Emergency fund and split the 85K remainder over two tax years and add to a pension/SIPP to get the 20% relief then decide later when to start drawing down on that. This way none of the capital is getting used up front and in theory she wouldn't need to dip in to it for renting. Her outgoings are very low and no debts, so subject to me scrutinizing her budget I/we think she could get by on her revised income and renting whilst keeping the 85K. She has no plans on retiring early. - I mean there's probably better ways to invest 85k, than a pension payment later in life. But this seems reasonable.

Although trying get her out of the mindset "Renting is a waste of money" and "The house will be your inheritance" is proving difficult!

I'm torn between these two options although she has her heart set on option 1 and she has already 'deal agreed' with the apartment. But honestly, I'm reluctant to take on an additional mortgage in my name, which may also hinder our plans to extend on our own later down the line for much needed improvements. Not to mention the additional stress of it all. We have enough going on in our own lives as it is!

Any opinions / advice would be greatly appreciated! Including any options I may have not even considered.

Thank you

In addition to you being a landlord, and that means complying with the law.

G_M

itneverends wrote: »

Hi,

Background:
-My Mother (60) is married but currently working with a solicitor to obtain a financial separation agreement, divorce possible at a later stage
-2 Children now Adults (No longer at home)
-Their home is now sale agreed for £180,000 with no outstanding mortgage.
-Earns approx £900 per month, made up of us paying her to help with child care and a part time job. Pay expected to rise to £1200 - £1500 IF an agreement is made with the separation. This will be made up by 50% of my Fathers numerous pensions
-No savings
-No pension

So Fathers numerous pensions produce between £600 - 1200 pm?

G_M

itneverends wrote: »

Option 1:
We found an ideal apartment for her close by to me which was on the market for £125,000, immaculate condition and ready to move in to(she has put an offer on it, accepted). I had thought about the idea of my Mother gifting me approx 80K and I use this as a deposit on the property and take on the mortgage myself with my partner. This will not be a buy to let but rather a second property that I own which she will live in.
It's a BTL. You will be her landlord.


I understand there will be added SDLT of 3% (Northern Ireland) and that my Mother is taking a risk by essentially giving me everything she owns. Once the settlement agreement happens she will be giving me the mortgage payment.
so paying you rent.

However, should she not be fit to work later down the line, I will be able to absorb this payment if I need to. She has sought legal advice on the matter, however I wanted to know is there anything else I need to watch out for regarding this?
See

* New landlords (1):advice & information :see links in next post

* New landlords (2): Essential links for further information




Your mother will be very vulnerable.She'll have nothing. What if something happened in your life eg you got divorved, made redundant. You could lose the house and she'd be homeles.


Option 2:
My Mother moves in with me and my partner temporarily (not ideal) while the financial settlement happens. Once that happens her income will be greater and she will be able to look at the option of renting a small 1 bed apartment for approx £450 - £500. Put 5K aside for Emergency fund and split the 85K remainder over two tax years and add to a pension/SIPP to get the 20% relief then decide later when to start drawing down on that. This way none of the capital is getting used up front and in theory she wouldn't need to dip in to it for renting. Her outgoings are very low and no debts, so subject to me scrutinizing her budget I/we think she could get by on her revised income and renting whilst keeping the 85K. She has no plans on retiring early.
Sounds financially a beter idea for her.She should keep her capital and create an income.


Although trying get her out of the mindset "Renting is a waste of money" and "The house will be your inheritance" is proving difficult!

Do you have savings yourself, or is here extra equity in your current property? If so could you loan her £the £35K she needs to buy the property she wants? It would then be in her name giving her better security. She repays you either monthly from income, and/or via her Estate when she dies.

xylophone

Would your father consider allowing your mother to take £135,000 from the house sale proceeds in return for her giving up any claim on his pensions?

Otherwise, has your mother explored the possibility of a mortgage, maybe with you as guarantor?

Has your mother obtained a state pension forecast?

https://www.nidirect.gov.uk/articles/check-your-state-pension

p00hsticks

xylophone wrote: »

Has your mother obtained a state pension forecast?
https://www.nidirect.gov.uk/articles/check-your-state-pension

I'd second this. given that the OP says;

itneverends wrote: »

Hi,
-Earns approx £900 per month, made up of us paying her to help with child care and a part time job.
-No savings
-No pension

Then if her part time job isn't sufficent to earn her a full years NI credits, and assuming that the children cared for are under 12 and that both parents work enough hours to earn full NI credits themseves, she should look at claiming adult chidcare NI credits
https://www.gov.uk/government/publications/national-insurance-credits-for-adults-who-care-for-a-child-under-12-fact-sheet/specified-adult-childcare-credits-fact-sheet
Not an immediate help, but may increase her state pension amount in six years time.

As for the possible house purchase, given that it sounds like your mother would be putting up the bulk of the money, I'd be looking at options for helping her to buy any property in her name (lending her the additonal money, guaranteeing a mortgage ?), rather than asking her to hand over her entire settlement to you and you buying. It will provide far more security for your mother and avoid you paying unecessary tax and having to take on all the responsibilities of a landlord.

itneverends

Thank you all for the quick feedback! I will try and answer each of your points.

Regarding the points that I will be technically buying to let. Although I didn’t initially plan on doing this formally via a BTL mortgage, being a landlord etc. I take it that it would be either illegal or against the banks lending code to obtain a regular mortgage while she then lives there and pays me back the mortgage costs each month?

I mean there's probably better ways to invest 85k, than a pension payment later in life. But this seems reasonable.

Out of curiosity, do you mean looking at building up a S&S portfolio?

So Fathers numerous pensions produce between £600 - 1200 pm?

From what I am led to believe this is the case, through various statements that have been left around the house.There has not yet (ever) been any financial transparency between the two of them. Facts will come out as the settlement is agreed.

Your mother will be very vulnerable.She'll have nothing. What if something happened in your life eg you got divorved, made redundant. You could lose the house and she'd be homeles.

My concerns exactly! The less I have to worry about the better. Although I proposed this idea, (admittedly without much thought or advice) I seen it really as a last resort. I am by no means encouraging it whatsoever.

Would your father consider allowing your mother to take £135,000 from the house sale proceeds in return for her giving up any claim on his pensions?

Communication between them is nil. However this sounds to me like a great approach! Thank you, I will put this to her to discuss with her solicitor.

Has your mother obtained a state pension forecast?

I have asked her and response has been yes. However I want to see it for myself. I will get a gateway account set up and get this confirmed.

As for the possible house purchase, given that it sounds like your mother would be putting up the bulk of the money, I'd be looking at options for helping her to buy any property in her name (lending her the additonal money, guaranteeing a mortgage ?), rather than asking her to hand over her entire settlement to you and you buying. It will provide far more security for your mother and avoid you paying unecessary tax and having to take on all the responsibilities of a landlord.

This is more like what I am wanting by the end of all this. I want to help, but want to be as little involved as possible in every way. I have an appointment this Friday with an independent mortgage advisor, it will just be me attending this appointment. I like the idea of being a guarantor for a mortgage, sounds like this option has the least involvement and everything will be in her name. From what I understand I will need to seek legal advice before applying.

I know some banks are offering later life mortgages I think Nationwide are now doing one.

Playing with some figures. 85K down payment on 125K @ 1.54% over 10 years this will be £360pm and £249pm over 15 years. But that assumes that she will be able to get one for that term and they accept her current income of only £600 (on paper) per month. We may need to wait until she starts receiving 50% of my Fathers pension which would put her in a much stronger position financially.
I have more than enough spare per month so shouldn’t be an issue if she was for some reason not able to pay the mortgage.

Between this and the option that my Mother gets more of the proceeds for the house with the trade off of losing or losing some of the pension. These will be far more favourable compared to any BTL / Private Renting options.

G_M

Regarding the points that I will be technically buying to let. Although I didn’t initially plan on doing this formally via a BTL mortgage, being a landlord etc. I take it that it would be either illegal or against the banks lending code to obtain a regular mortgage while she then lives there and pays me back the mortgage costs each month?

You would be commiting fraud by applying for a residential mortgage whilst having no intention of living there yourself.


Do you have a mortgage at present? If so, this would come to light (assuming you did not declare it). So you'd then be forced to apply for a 2nd home mortgage - whilst still commiting fraud since you do not plan to use it as a 2nd home.


Trouble with a BTL mortgage is that most prohibit letting to family.


So yiu really need to speak to an indipendant mortgage broker if you want to go down the route of buying in your name.


As you say, a number of lenders will consider a 60 year old. Again, an independant broker can recommend them, as well as considering her income, and the possibility of you acting as guarantor.


Or as suggested, speak to your father about increasing the share of the sale price he'll give her. Does he have somewhere to live? If so, is it owned? Does it not constitute part of the settlement?


Or can you (re) mortgage your own property and give/lend her the money?

AnotherJoe

AIUI from others posts here from people that have done it, you can get a second residential mortgage that not a BTL, so there's potentially a lot of incorrect info going on here regards you having to be a landlord.
How about a variant of option 1.
Your mum takes the equity she gets, £80k or so? You then lend her £45k. The £45k either comes from cash you have or you extend the mortgage on your house. Your mum pays you back over time.
This way there is no issue with deprivation of assets, no extra 3% SDLT and your £45k is protected by a charge on the house (in case mum goes into care). She pays you back until she can't.