Joint mortgage with our daughter and inheritance tax

Mutabilisrose

Myself (58) and my husband (56) had to retire at 55. We purchased our home in 2001 on a repayment mortgage. Hubby was made redundant a bit before I retired. So for a while I was th only one with an income and because the mortgage was high I had to use my pension lump sum to help with expenses. Hubby had no luck getting a new job they never got back to him. He had risen to a managerial position in his firm despite having no school qualifications. Nowadays they want graduates for the same positions. After a while my lump sum was gone and we were going to lose our home. The only way to keep it was to remortgage the amount left owing (£100,000) My daughter (only child) agreed to join us as we wouldn’t have got it on our pensions (By now hubby had took early retirement as we needed the income. We both have small private pensions. So we currently have a mortgage in all 3 names for £100,000 (we have had it for 2 years and there is 20 years left) The plan is should our daughter get a serious relationship we will move out and rent somewhere and she will stay in the property. We plan then to come off the mortgage. Not sure where we stand though. Can anyone advise or should we talk to a solicitor?

sammyjammy

What if your daughter or her new partner don't want to live in your property?  In what way do you own the property?  Joint tenants or tenants in common?  What are the shares between the three of you?

Keep_pedalling

I can’t see where inheritance tax fits in to this. You would have to have assets in excess of £1M for it to be of concern and it seems you are nowhere near being in that position. 

Having looked at your previous thread on this subject you would be foolish to give what is your only major asset away to your daughter and live in poverty for the rest of your lives. 

RAS

This isn't an inheritance tax issue. The real issue is that in the last three years you have used the new mortgage to kick a can down the road that needs dealing with now. By spreading your mortgage repayments over 22 years, you can afford the monthly payments but will end up repaying vastly more interest than you would have if you have kept to the previous term.

And meantime you've trapped your daughter in an unsustainable situation. Does she really want to live with mum and dad for the next 20 years? How are either you or hubbie going to be able to afford the payments if the other dies or has to go I to care sometime in the next 20 years?

You say that houses locally struggle to sell. Well get the house on the market now in the hope of selling in in 3-5 years. Presumably there are a lot of other houses similarly stuck to which you can move.

And get yourselves back into part-time work even it's stacking supermarket shelves, so you can overpay on the mortgage to increase the capital available and cover the costs of moving. You could pay the entire lot off by the time you get your state pensions.

Sorry to be brutal but there's no point "trying to leave your daughter something" at the cost of severely limiting her life whilst you are alive.

Mutabilisrose

sammyjammy said:

What if your daughter or her new partner don't want to live in your property?  In what way do you own the property?  Joint tenants or tenants in common?  What are the shares between the three of you?

They can sell. Not sure what you mean. Property is worth about £600,000. We had 6 years left. It has £100,000 remaining. I can’t remember but I’m pretty sure it was joint tenants as we are a family and wanted it that way. Not sure what you mean by shares. I assume it’s equal. She did not put any extra lump sums when we remortgaged but she pays half as she is working.

bobster2

Mutabilisrose said:

sammyjammy said:

What if your daughter or her new partner don't want to live in your property?  In what way do you own the property?  Joint tenants or tenants in common?  What are the shares between the three of you?

They can sell. Not sure what you mean. Property is worth about £600,000. We had 6 years left. It has £100,000 remaining. I can’t remember but I’m pretty sure it was joint tenants as we are a family and wanted it that way. Not sure what you mean by shares. I assume it’s equal. She did not put any extra lump sums when we remortgaged but she pays half as she is working.

This needs some clarification. You took out a new mortage - in the names of the 3 of you. At that time did you add your daughter to the deeds for the property? Or has she simply shared liability for the repayments without being an owner?

You say your daughter can move in at some point - and you will move out at some point? Do you imagine gifting the property to her at that point? Or her buying you out? How would you afford to rent somewhere else if you move out?

Mutabilisrose

Keep_pedalling said:

I can’t see where inheritance tax fits in to this. You would have to have assets in excess of £1M for it to be of concern and it seems you are nowhere near being in that position. 

Having looked at your previous thread on this subject you would be foolish to give what is your only major asset away to your daughter and live in poverty for the rest of your lives. 

Oh I had read if your estate is worth more than £325000 it kicks in. The house is worth around £600,000. We wouldn’t be in poverty. We live in the North West property is cheaper to rent than in the south. It would only be a small place as we don’t need anything big. I guess I’m in the camp where my child means everything to me and I want her life to be easier if I can make it so. I do understand what you are saying though but I wouldn’t have done it this way if I thought we would struggle.

Mutabilisrose

RAS 

I see what you mean but when our backs were against the wall we only seemed to have 2 choices. The other was to sell, but we would have needed to in 3 months before I would have defaulted on the mortgage and potentially lost the house anyway. As the house was worth £600000 we thought the choice we made was better as we can overpay and reduce the term and interest. 

She will only be living with us as long as she wants. We all have always got along amazingly. She can afford the payments on her own, mortgage is £635, she could barely rent anywhere for less. 

I am mentally and physically disabled and hubby is my carer. Our private pensions are reasonable. We have definitely already been looking at overpaying the mortgage though.

I don’t mind you being brutal, perhaps I didn’t word the post well. We had a long chat and our daughter was part of the decision. Had she said I don’t want to be shackled we would have not done the 3 way mortgage. We would have had to sell at a rock bottom price. She knows we will move out as soon as she wants to live with a partner or get married. Meantime we are all happily living together. 

My main aim though is for her to be the only person on the mortgage and I’m not sure how to go about it we are on a fixed rate of 4.42 for the next 5 years. I think we probably do need a solicitor to guide us as to the best way forward as the circumstances are so unusual.

bobster2

Mutabilisrose said:

She will only be living with us as long as she wants. We all have always got along amazingly. She can afford the payments on her own, mortgage is £635, she could barely rent anywhere for less. 

I am mentally and physically disabled and hubby is my carer. Our private pensions are reasonable. We have definitely already been looking at overpaying the mortgage though.

Things just don't add up here. You are saying you could eaily afford to rent somewhere if you move out - but you couldn't afford the mortgage of £635 per month without your daughter paying half - but she could barely rent anywhere for less than this???

In a previous thread you indicated that your private pension is just about £1000 pm. How much is your husband's pension? Is it really practical for you to be able to rent somewhere else?

Mutabilisrose

bobster2 said:

Mutabilisrose said:

She will only be living with us as long as she wants. We all have always got along amazingly. She can afford the payments on her own, mortgage is £635, she could barely rent anywhere for less. 

I am mentally and physically disabled and hubby is my carer. Our private pensions are reasonable. We have definitely already been looking at overpaying the mortgage though.

Things just don't add up here. You are saying you could eaily afford to rent somewhere if you move out - but you couldn't afford the mortgage of £635 per month without your daughter paying half - but she could barely rent anywhere for less than this???

In a previous thread you indicated that your private pension is just about £1000 pm. How much is your husband's pension? Is it really practical for you to be able to rent somewhere else?

Joint private pension is £3000. Yes we can afford the £635 but all 3 of us are on the mortgage so she is contributing and as it is well in our minds her house now she pays half. Before this mess the original mortgage was £1400 and that plus all the other outgoings was what we couldn’t afford when hubby was made redundant. The plan was to work until 60/65 and pay off the mortgage which had 6 years left. But I got very sick and had to retire at 55. Hubby was made redundant around same time. 

bobster2

Mutabilisrose said:

Joint private pension is £3000. Yes we can afford the £635 but all 3 of us are on the mortgage so she is contributing and as it is well in our minds her house now she pays half. Before this mess the original mortgage was £1400 and that plus all the other outgoings was what we couldn’t afford when hubby was made redundant. The plan was to work until 60/65 and pay off the mortgage which had 6 years left. But I got very sick and had to retire at 55. Hubby was made redundant around same time. 

Putting aside what's in your minds - as I asked earlier - did you add her to the deeds when she became a joint mortgage holder?