Rules on family living in property when you are not there

bdubs32

Hi All

I am looking to buy my first property in the countryside. My job is in London but has gone remote. I may have to return to London full-time when Covid is less serious but I don't know when. Either way, I plan to have the countryside property as my main residence, including for many weekends, and will take an additional rental property in London if needed. I am a fairly high earner, so this is not a problem financially, and I plan to find a permanently remote job in the future.

I would like for my mum to live in the house with me. She currently pays rent herself, but I would rather she has more security by staying with me. I would like her to replace her current rental payments by contributing to the mortgage on my house, but it would not be at a market rental rate. My plan would be for her to gift me a sum of money from her income each month (she has no capital - neither property or savings, so depreciation of assets re. IHT is not my concern), which would probably equate to around 60-70% of the mortgage payment. My understanding is that there is no limit to the amount a parent can gift a child, as long as it's from income and doesn't effect their living standards.

I am aware that I could have her as a lodger, but I do not want to do this as I may go to work abroad at some point, and would lose the right to a lodger/ Rent-A-Room relief if I did so. I think it would be easier therefore if she lived there rent-free in an official sense. The amount she would gift me would be under the Rent-A-Room relief limit.

I have spoken with both a mortgage broker and accountant, who think this arrangement is fine and not rule breaking, since I would not be seeking to profit from it - i.e. I will still be paying towards the mortgage. However my concern is that it could be viewed as some kind of buy-to-let through the back door if she stays there and effectively contributes to the mortgage, even if it is my primary residence and the only home I own.

Does anyone have any thoughts on this?

Thank you!

silvercar

She’s a family member paying Board, I don’t think you need to consider it any deeper than that. Plenty people have their offspring living at home and paying board, just because she is the older generation to you rather than the younger it is the same situation. 

Mickey666

bdubs32 said:

Hi All

I am looking to buy my first property in the countryside. My job is in London but has gone remote. I may have to return to London full-time when Covid is less serious but I don't know when. Either way, I plan to have the countryside property as my main residence, including for many weekends, and will take an additional rental property in London if needed. I am a fairly high earner, so this is not a problem financially, and I plan to find a permanently remote job in the future.

I would like for my mum to live in the house with me. She currently pays rent herself, but I would rather she has more security by staying with me. I would like her to replace her current rental payments by contributing to the mortgage on my house, but it would not be at a market rental rate. My plan would be for her to gift me a sum of money from her income each month (she has no capital - neither property or savings, so depreciation of assets re. IHT is not my concern), which would probably equate to around 60-70% of the mortgage payment. My understanding is that there is no limit to the amount a parent can gift a child, as long as it's from income and doesn't effect their living standards.

I am aware that I could have her as a lodger, but I do not want to do this as I may go to work abroad at some point, and would lose the right to a lodger/ Rent-A-Room relief if I did so. I think it would be easier therefore if she lived there rent-free in an official sense. The amount she would gift me would be under the Rent-A-Room relief limit.

I have spoken with both a mortgage broker and accountant, who think this arrangement is fine and not rule breaking, since I would not be seeking to profit from it - i.e. I will still be paying towards the mortgage. However my concern is that it could be viewed as some kind of buy-to-let through the back door if she stays there and effectively contributes to the mortgage, even if it is my primary residence and the only home I own.

Does anyone have any thoughts on this?

Thank you!

If two professional sources have said it's perfectly OK, what are you expecting a forum of lay people to say?

lincroft1710

bdubs32 said:

I would like for my mum to live in the house with me. She currently pays rent herself, but I would rather she has more security by staying with me. 

Does anyone have any thoughts on this?

She will actually have less "security" by living with you as a lodger or family member paying board than as a tenant of a property not owned by you. As a lodger, it would be very easy to evict her, as a tenant, it would be far, far more difficult for her landlord to evict her.

BrassicWoman

I wouldn't if I were your mum. What strange lodger are you foisting on her when abroad?
Sounds like you can't actually afford this.

FTB_Help

BrassicWoman said:

I wouldn't if I were your mum. What strange lodger are you foisting on her when abroad?
Sounds like you can't actually afford this.

Agree with this.

If your broker and accountant said its fine then im sure its fine.

But as your mum will be cover 60-70% of your mortgage payment, does this mean you can't afford this yourself?

And secondly does your mum actually want to live with you and pay off 60-70% of your mortgage?

bdubs32

Thanks for the replies. I know I have had professional advice, but it never hurts to get a second opinion, and this is a very knowledgeable community in my experience

To answer some questions about why my mum would do this: she has had a lot of bad luck financially and doesn't have much saved nor a house of her own, so I figured this would be a way she could help to actually pay towards some kind of equity (e.g. if the house price rises, I can sell in five years and buy her a flat), rather than just paying rent outside of the family.

Grumpy_chap

bdubs32 said:

this would be a way she could help to actually pay towards some kind of equity (e.g. if the house price rises, I can sell in five years and buy her a flat), rather than just paying rent outside of the family.

This is a new twist.
If your Mum is just "gifting" you a sum less than rent ("board"), that does not secure her equity in the property. 

Of course, you can sell and "gift" her back some of the equity, but what will you buy that is suitable for yourself after deducting the costs of a flat for your mother?

bdubs32

Grumpy_chap said:

bdubs32 said:

this would be a way she could help to actually pay towards some kind of equity (e.g. if the house price rises, I can sell in five years and buy her a flat), rather than just paying rent outside of the family.

This is a new twist.
If your Mum is just "gifting" you a sum less than rent ("board"), that does not secure her equity in the property. 

Of course, you can sell and "gift" her back some of the equity, but what will you buy that is suitable for yourself after deducting the costs of a flat for your mother?

Yes that's the plan (gifting equity).

It may not work out of course - e.g. if prices fall. But I don't think there's much to lose versus her continuing to rent elsewhere and unable to save for a place of her own.

MovingForwards

https://forums.moneysavingexpert.com/discussion/6227521/rules-on-buying-a-house-and-not-living-in-it#latest

Looks like OP is on a fishing trip to see which way s/he would be able to secure a mortgage.

sheramber

Does she want a place of her own with all the responsibility for  maintenance and repairs?
Will she have money for that?
Are you assuming you will able to buy a flat outright in 5 years?