Buying % of house from parent

ZanyZoo

Hello, my mother in law has a guest house that she wants to sell to us but continue living in. Ideally we would purchase the top 2 floors to run as holiday accommodation and she would keep the ground floor and continue living there. I'm assuming we would not get a mortgage for a percentage of a house? We could buy the top 2/3rds of the house outright if she 'gifted' my husband's share of the property. I.e. The property is worth £350K therefore 2/3rd of this is £233. If she gifted him £100k we could buy outright. He has one other brother. Is any/all of this possible? Thanks for reading 🙏

SpiderLegs

you cannot get a mortgage for this but yes you can pay her 133k to become joint owners of the property with a 33/67% split in your favour.
the 100k ‘gift’ would still be considered in terms of deprivation of assets, for IHT it would depend on what other assets she had.

AdrianC

So you would not be living there yourselves?

You already own your home elsewhere?

ZanyZoo

I guess the other option is to try and purchase the whole property with a mortgage and charge her rent for the ground floor. Again, we would be relying on her to gift an amount of money to make this anywhere near affordable! How do we decide on how much this would be? Would his brother then get the same amount? 

ZanyZoo

AdrianC said:

So you would not be living there yourselves?

You already own your home elsewhere?

Yes we have our own home with a mortgage. We would be running my MILs house as a business. 

K_S

@zanyzoo If it's a succesfully running business at present with a track record to show, you may be able to get a holiday-let mortgage on it with your MIL occupying part of it. This is just a possibility, lots of boxes to tick and criteria to meet.

However, this is a commercial mortgage (none of the consumer protections of a residential mortgage) and will be significantly more expensive than a standard residential mortgage.

To answer your question, no you can't get a mortgage on part of a property and in any case if you intend to run a holiday accomodation business, a normal mortgage is out of the question in any case.

AdrianC

As far as what she decides to give to you, and to the brother, that's entirely up to her. There's no law saying gifts must be equal... How would if affect the relationship between the brothers?

When you say "guest house", do you mean an HMO with semi-permanent residents, or do you mean a holiday let business? Basically, a hotel? If the latter, you're into the realms of commercial loans, not even BtL.

I presume there's no scope to raise the funds by extending your current residential mortgage? And you wouldn't/couldn't live there yourselves?

getmore4less

Don't need to have a gift involved she can act as a lender if she does not need all the money up front.

She sells you say 2/3 of the place for £233k and you pay her back maybe some now or on an ongoing basis.
or
buy all of the place and you pay her back.

Don't forget the SDLT  and CGT later on.

What about she keeps the property and you just run the business

ZanyZoo

AdrianC said:

As far as what she decides to give to you, and to the brother, that's entirely up to her. There's no law saying gifts must be equal... How would if affect the relationship between the brothers?

When you say "guest house", do you mean an HMO with semi-permanent residents, or do you mean a holiday let business? Basically, a hotel? If the latter, you're into the realms of commercial loans, not even BtL.

I presume there's no scope to raise the funds by extending your current residential mortgage? And you wouldn't/couldn't live there yourselves?

We would all like the amount to be equal. Good relationship between brothers but he lives in NI so has no interest in running the business. 
When I say guest house I mean B&B business since the 80s. She is now 73 so not running at full capacity with just one room let through Airbnb.
So I'm guessing a commercial loan is to be avoided if possible?! No, I don't think we could extend our mortgage to raise the funds and we don't want to live there. 

ZanyZoo

getmore4less said:

Don't need to have a gift involved she can act as a lender if she does not need all the money up front.

She sells you say 2/3 of the place for £233k and you pay her back maybe some now or on an ongoing basis.
or
buy all of the place and you pay her back.

Don't forget the SDLT  and CGT later on.

What about she keeps the property and you just run the business

I think she would like the money up front to live on for however long she has left... 
The property needs quite a bit of renovation to bring it up to modern expectations! So it's not just a case of taking over the business we would be investing also so thought it would be best to purchase...? 

RAS

I appreciate that MIL is probably fond of the house, but it might well be better to bite the bullet and just sell up as a "going" concern.

At her age MIL could live another 20 years and how is she going to fund renovations on her lower third of the property, or even maintenance? Even worse, if the rental folk discover she's local firstly, and related to the owner, she'll inevitably get drawn into the day to day issues with the rentals.

"This doesn't work, sort it!"
"We can't make this work, show us."
"We've just damaged something, where is the stop-!!!!!!, fuse box?"

And you'll be wanting her to give a key to the tradesman or the delivery people. OK it might give her purpose but it might also prevent her leading a different life.