Buying house with gift from mother and having her live in it until she dies

mowermanc

Sorry the title is blunt, but my mother lives remotely 300 miles away. She is not yet past her best but wants to move nearer to us whilst she is still young enough to settle into the area and build up a new social network.
She has sold her house for £235k which was a bit less than she was hoping for. A comparable property near us is nearer to £285k.
She would like to gift me the money from the sale, rent for a while, and then I take a out a mortgage for the remaining £50k using her gift as a deposit.
I've never really considered something like this, what are the pitfalls?
I'm currently renting and have been approved in principal for a mortgage to cover this. Is there any reason this is a bad idea? Someone mentioned a 7 year spell that if she went to a care home the gift would be required to cover it.
Thanks for any advice!

Linton

Potential pitfalls:
1) Mother needs care.  If mother was hoping for Local Authority help with funding it could regard the gift as Disposition of Assets and refuse to contribute.  There is no time limit on how far back the LA can look.  If Mother has plenty of other assets this would not be a problem as she would be self-funding anyway.
2) Tax.  Mother dies within 7 years.  The cash gift is regarded as part of her estate for inheritance tax purposes.  If she is below the IHT threshhold anyway not a problem.
3) Gift with reservation - it isnt really a gift as Mother is presumably getting a benefit from it - free accommodation.    HMRC could impose tax as if the gift had not occured,  there is no time limit.  Again if IHT wont be due anyway there is no problem.
4) You die and your house has to be sold.  Mother left homeless.
5) You and Mother fall out and you ask her to leave,
6) If you are married - you divorce and the house has to be sold nto split the assets.  Again Mother loses her home.

Possible errors and ommissions!  However I hope you get the idea that arranging this as a gift could have serious consequences, particularly for Mother.  Much better that she retains her financial independence.

ritz55

I don't think you will find a mortgage with a gift and then they also live in the property as well. 

[Deleted User]

ritz55 said:

I don't think you will find a mortgage with a gift and then they also live in the property as well. 

kind of a 50/50 split with lenders who are fine with this and ones you wont allow it

mowermanc

Great advice thanks. Some interesting things to take on board.

tigerlily74

ritz55 said:

I don't think you will find a mortgage with a gift and then they also live in the property as well. 

My lender has just agreed to this. 

getmore4less

What about joint ownership where you own 50:50
You could  get a bigger mortgage mum gets to keep some cash or the size of the gift is reduced if she has and interest in the property and avoids gift with reservation.