Buying House with Annex for Mum

ChrisG72

My mother is selling her house and plans to split the profits equally between me and my sister. We will then use our half, along with the profits from the sale of our house to buy a new property with an annex and all live there. Are there any pitfalls regarding inheritance or capital gains tax? 

The value of her house is around £360K and ours is £400K. 

Thanks. 

princeofpounds

Inheritance tax 7 year rule.
https://www.gov.uk/inheritance-tax/gifts

Deprivation of assets in case of care.
https://www.ageuk.org.uk/globalassets/age-uk/documents/factsheets/fs40_deprivation_of_assets_in_social_care_fcs.pdf

Will the annex be a totally self-contained dwelling or not?

ChrisG72

Simple answer is we won't know until we find the property we want. I assume there's a difference?

bolwin1

I suspect you won't need a mortgage, but if you do, it can be very hard to get one on a property with an Annex. The main reason being the mortgage provider won't easily be able to get rid of whoever is living there if you defaulted on the mortgage. 

youth_leader

My brother bought with my Mum, they eventually settled on a three storey house.  My Mum had the downstairs as her lounge/bedroom and they put in a shower/toilet.  They all shared the large kitchen, which also had a conservatory.  

NameUnavailable

bolwin1 said:

I suspect you won't need a mortgage, but if you do, it can be very hard to get one on a property with an Annex. The main reason being the mortgage provider won't easily be able to get rid of whoever is living there if you defaulted on the mortgage. 

Why? No different than letting out a spare room to a lodger (well that would be more risky in fact).

My mate did something very similar to the OP and got a mortgage without any hassle.

[Deleted User]

NameUnavailable said:

bolwin1 said:

I suspect you won't need a mortgage, but if you do, it can be very hard to get one on a property with an Annex. The main reason being the mortgage provider won't easily be able to get rid of whoever is living there if you defaulted on the mortgage. 

Why? No different than letting out a spare room to a lodger (well that would be more risky in fact).

My mate did something very similar to the OP and got a mortgage without any hassle.

In the OP's case the person living in the annex will have contributed towards the deposit but presumably not be party to the mortgage.  That will be an issue for a lot of lenders because the person in the annex could  halt a repossession by claiming a beneficial interest in the property.  

babyblade41

you will get a separate council tax bill for the annexe if it has the kitchen in it , 
What I did was build on my own house and rented my Mum's house out . No mortgages which made it easier . I was already a LL for other properties so knew what being a LL entailed .

princeofpounds

If it’s true annexe - separate dwelling etc. then it may not meet criteria for principal personal residence relief on sale for CGT. You’ll need to evaluate against criteria. 

ChrisG72

Thanks for all of your replies. Certainly plenty to consider and not as straight forward as I'd hoped. I'm glad I asked! It seems that the best (simplest) solution is an attached annex and no mortgage. 

lincroft1710

NameUnavailable said:

bolwin1 said:

I suspect you won't need a mortgage, but if you do, it can be very hard to get one on a property with an Annex. The main reason being the mortgage provider won't easily be able to get rid of whoever is living there if you defaulted on the mortgage. 

Why? No different than letting out a spare room to a lodger (well that would be more risky in fact).

My mate did something very similar to the OP and got a mortgage without any hassle.

A lodger has virtually no rights and is very easy to evict. Tenants and owners or part-owners, just slightly more difficult