Changing ownership required prior to new mortgage?

Darren84

Advice needed for selling current house and new mortgage.

My wife and I moved in with her parents and paid off the remaining mortgage on their behalf. The property is now mortgage free and in her parents name. Our intention is to sell the house we are in (in her parents name) and use the money (about £200k) as deposit on a mortgage in our name. We will be looking to borrow around £150k as looking at larger properties in region of £350k.

My question is, do we need to put our current house in our name before we sell and apply for a mortgage? Is there anything else we may need to be aware of?

Brie

Where are her parents going to live?  With you?

If her parents sell the house and give you money to buy something just in your names (with them living with you or not) then the bank giving you the mortgage are going to want to know that the money is an outright gift to you and that they have no claim on the house.  

And whether her parents live with you or not should they at some point need council support for their care then the council will be looking at you to pay for it.  This is because her parents would be accused of deprivation of assets so the money they gave you would be considered to still be theirs and not yours.  As a result the council might suggest you need to sell the home to pay for the care yourselves.  

Meanwhile if you want to put the house in your names they will need to agree to this obviously but I'm not quite sure that it improves the situation as described above.

MWT

Darren84 said:

Yes they would continue to live with us. The arangement suits us all for a variety of reasons.

I would worry less about derivation of assets and more about the IHT implications of it being a gift with reservation as they will be living with you but presumably not paying rent? ... this means that the value of their gift remains in their estate for IHT purposes.

Depending on the size of their remaining estate (if any) this may or may not be something thye need to consider.

Keep_pedalling

MWT said:

Darren84 said:

Yes they would continue to live with us. The arangement suits us all for a variety of reasons.

I would worry less about derivation of assets and more about the IHT implications of it being a gift with reservation as they will be living with you but presumably not paying rent? ... this means that the value of their gift remains in their estate for IHT purposes.

Depending on the size of their remaining estate (if any) this may or may not be something thye need to consider.

With a house worth £200k and having their mortgage paid off by the OP, I don’t think their estate is going to be anywhere near IHT territory.

Keep_pedalling

This would be a lot easier if no mortgage was involved. For their long term security if would be better for them to either joint owners or to lend you the equity secured with a charge on the property. This would protect them in the event your premature death, divorce or bankruptcy. 

Hoenir

Darren84 said:

but this wouldnt be a deliberate deprivation of assets so would hope that all would be ok.

Why aren't they providing the deposit and all four of you being named on the mortgage then? That way they would still retain a financial interest in the property. 

silvercar

It’s fine for them to sell their house, gift you the deposit money and you take out a new mortgage in your own names.

If the parents aren’t currently needing care, then deprivation of assets isn’t an issue if care needs arise in the future. It’s only if it’s deliberately done when care needs are envisaged that it’s an issue.

Transferring to joint names now will be a headache with the mortgage and will mean waiting an age for Land Registry to update the deeds. It’s an unnecessary complication. Have a separate document setting out what you are doing if you are worried about future divorce or bankruptcy etc.