Re-mortgaging my house to help mum buy her own home

louale

Hi, 
My mum is in her 70s and moved back to the UK a couple of years ago when my father passed away. She is currently renting a flat and the rental cost is taking up the majority of her pensions income. She has a limited amount of money to purchase a flat/house, so my siblings and I are going to help her with the purchase (our savings). Having spent the last 2 years looking for a property anywhere near her price range, the perfect little house has come up for sale; however, collectively, we are £50K short. 
I'm thinking what options are available to us, as she has waited so long to find a house within her price range, and we fear that prices will go up, and she will be priced out. 
I am the only sibling based in the UK and in full time employment.  I don't believe I cant get a loan for £50K to help her make the different up?  What are our options?  My mum is in her 70s and  quite scared at the prospect of an equity release mortgage. 
I was wondering if I could remortgage my house (I have paid off the mortgage) and use the funds to give to my mum to make up the outstanding amount so she can purchase this house. Would the bank let me remortgage to help my mum out? If not, what are our options? 
Any tips or advice would be greatly received. 
Thank you! 

Veteransaver

No reason in theory that you can't and the bank should be able to lend against your own house especially as you currently have no mortgage.
£50k can be a little small for a bank to lend as a mortgage though so you may be a bit restricted in who will lend. Unless you borrow more initially and then pay back the excess (you'll need to have a mortgage with no early repayment charges though)
You can get £25k personal loans I believe.
You'd probably want the loan well recorded against her assets so that you get properly repaid ahead of any other beneficiaries in her will though

newsgroupmonkey_

Are you aware you could lose it all? Every penny?

If you need to go into care in the UK, the council will put a charge (and it's a primary charge after any mortgage) on the property. You could burn through a couple of hundred thousand in a year or two.

If your Mum has a decent pension, has she considered getting a mortgage herself for the extra £50k? My folks have just taken out a small mortgage. They're 76 and 80. Bank doesn't care, because they have over £400k in equity.

Might as well be interest only.

HampshireH

This plan sounds like it won't end well.

You are going to give away all your savings AND get a loan or mortgage so you'll be Co owner of another property. 

You'll pay extra stamp duty at the beginning and depending on any increase in value you may have Capital Gains Tax on your part on disposal. Not only that but you'd also own with at least 1 other sibling to complicate things further.

I can't still the attraction here or what benefit you would get.

What about you? You've saved for a reason what if you need the money? Also what happens eventually when mum passes away and you are solely handling the estate as your UK based with siblings who want their money back but the value has perhaps decreased/swallowed up in legal fees and no one gets what they put in back?

Rather than buying has your mum considered independent living in sheltered accommodation? I don't mean a care home set up but self serving flat or bungalow owner by the council or housing association where there is usually a social or affordable rent and less uncertainty around security of tenure.

FlorayG

While it's probably technically not allowed I do know at least two people who are living in a house with a BTL mortgage. (I think it was originally a rental then they sold their main house and moved into it) I don't know how they got it or how it works but might be worth investigating because your age and income are not relevant, it's based on the rental value of the property and the larger deposit
Probably would still be a financial and legal mess though, I don't know, just offering what I know people have done

grumpy_codger

HampshireH said:

You are going to give away all your savings AND get a loan or mortgage so you'll be Co owner of another property. 

You'll pay extra stamp duty at the beginning and depending on any increase in value you may have Capital Gains Tax on your part on disposal. Not only that but you'd also own with at least 1 other sibling to complicate things further.

I can't still the attraction here or what benefit you would get.

...

Who said co-owner, benefit? 

In our money-driven world there still is some place for trust and unselfishness, especially between relatives. The OP can get (some) money back as inheritance, but yes, in this case there can be a problem with going into care and the council.

Alfrescodave

You're suggesting that your mother is struggling to live on her pension so instead of you all using your savings etc to buy your mother a flat /house, could you not just top up her pension by giving her a monthly allowance.?

Bookworm105

HampshireH said:

This plan sounds like it won't end well.

You are going to give away all your savings AND get a loan or mortgage so you'll be Co owner of another property. 

You'll pay extra stamp duty at the beginning and depending on any increase in value you may have Capital Gains Tax on your part on disposal. Not only that but you'd also own with at least 1 other sibling to complicate things further.

I can't still the attraction here or what benefit you would get.

What about you? You've saved for a reason what if you need the money? Also what happens eventually when mum passes away and you are solely handling the estate as your UK based with siblings who want their money back but the value has perhaps decreased/swallowed up in legal fees and no one gets what they put in back?

Rather than buying has your mum considered independent living in sheltered accommodation? I don't mean a care home set up but self serving flat or bungalow owner by the council or housing association where there is usually a social or affordable rent and less uncertainty around security of tenure.

there has been no suggestion that OP or their siblings will be co-owners. They will simply be a source of funds used by mother to buy a home in her sole name
no higher rate SDLT
no CGT 

the attraction is being able to help mother avoiding to need to spend most of her pension income on rental 

benefit to them? none, as you identify there is a risk that care home fees could absorb the value of mother's home and/or any residual sum does not return their respective share to each funder on mothers death 

moving into council sheltered housing may be cheaper rent but I'll bet will have a waiting list and won't be that cheap anyway.

ian1246

You can do it but you need to speak to a solicitor about how to protect your loan to your mother with security on the property.

Ultimately she's an adult who's had a whole lifetime to prepare for old age & retirement. Her failings are now being shunted onto you & siblings to rectify - you need to put yourselves first & ensure that any significant loans are adequately protected.

I wouldn't put it as a share of ownership in the property due to tax implications, but instead put it as a primary charge on the property for XX value plus interest per year (to be calculated based on the bank of england base rate every year on XX date or something similar) to be paid in full upon her death or house sale - whichever comes first.

By putting it as a primary charge, it'll take priority over future charges (i.e. council care home fee's!) - and it is entirely legitimate since ultimately it *is* a loan!!!

Speak to a solicitor. Also draw up a loan agreement to accompany the charge so there is supporting paperwork should it ever be needed in the future.

If you do the above, she'll benefit from a mortgage free property with no housing costs whilst she's alive - it ll then be for the administrator to sort the house sale out & repayment of the loans from the equity to release the charges.

This'll inevitably impact what's left of the estate after repayment, bbut at least this way your all protected in the long run, whilst achieving the primary objective (housing for mum).

sheramber

ian1246 said:

You can do it but you need to speak to a solicitor about how to protect your loan to your mother with security on the property.

Ultimately she's an adult who's had a whole lifetime to prepare for old age & retirement. Her failings are now being shunted onto you & siblings to rectify - you need to put yourselves first & ensure that any significant loans are adequately protected.

I wouldn't put it as a share of ownership in the property due to tax implications, but instead put it as a primary charge on the property for XX value plus interest per year (to be calculated based on the bank of england base rate every year on XX date or something similar) to be paid in full upon her death or house sale - whichever comes first.

By putting it as a primary charge, it'll take priority over future charges (i.e. council care home fee's!) - and it is entirely legitimate since ultimately it *is* a loan!!!

Speak to a solicitor. Also draw up a loan agreement to accompany the charge so there is supporting paperwork should it ever be needed in the future.

If you do the above, she'll benefit from a mortgage free property with no housing costs whilst she's alive - it ll then be for the administrator to sort the house sale out & repayment of the loans from the equity to release the charges.

This'll inevitably impact what's left of the estate after repayment, bbut at least this way your all protected in the long run, whilst achieving the primary objective (housing for mum).

The OP hasn’t hasn’t mentioned lending the money to her mother.

I think it is intended as a gift.

Presumably, the siblings hope to  inherit the house in due course. So will get their money back then. 

The only complication they need to consider is that should mother need care  the house value may be little or none when the time comes. 

Herzlos

Alfrescodave said:

You're suggesting that your mother is struggling to live on her pension so instead of you all using your savings etc to buy your mother a flat /house, could you not just top up her pension by giving her a monthly allowance.?

It might be more cost effective to help the mother buy a house than to help her pay rent.