a little advice needed...

Dmuggy

Hi there,
here is the deal. I live with my girlfriend and her son, in a three bedroom house owned by her mother, who also lives with us. During a chat i had with her mother yesterday, we got talking about what we would do if the worst happened and she passed a away (she is 85). She asked me if i would like to buy the house off her for £15,000. It is worth around £100,000 (but needs a bit of work on it). The mortgage on the house was paid off many years ago.She would live in the house with us until she passed away. Here are my questions...
1) Is it possible to just go to the land registry and simply get the house put into my name, or do lawyers etc. have to get involved?
2) her mother has two other children who, although not close to her, may want their cut of her estate in the event of her death. Would they be able to take me to court to get a share in the event of her death?
3) would you advicse that i got a house survey, or would that be overkill for a house that is costing a mere £15,000.
4) I would like to borrow £25,000 in total so that i could do the house up with the spare £10,000. I am prepared to stretch to around £250 a month over a max of 25 years. Would you advise a mortgage or a loan? Protection or no protection?
5) It is possible that her mother may have a secured loan on the property. What would happen if the house is signed over to us and she then passed away. Do we lose the house ao could we simply pay off the rest of the debt?

Any help would be marvellous, thanks in advance,
Dmuggy.

iolanthe07

You really need professional advice on this one. I think that the difference between what you pay (£15K) and what it's worth (£100K) would be subject to capital transfer tax (less allowances) unless she lived for seven years, but you really need to consult an accountant - and a solicitor over the question of whether other members of the family could claim a share.

chappers

Not being morbid but just get her to write a will leaving the house to your girlfriendand wait until she dies. Then take out a £10k personal loan to do up the house. In theory the other children could contest the will, but provided she is of sound mind or is not making the will under duress this shouldn't be a problem.
With regards to the secured loan, does she not have some form of insurance/life cover to cover the loan in the event of her death.

lifeisgood

Any secured loan would have to be cleared before ownership of the house could be transferred to you. You can easily find out whether this exists by checking on the Land Register.

If your gf's mum doesn't have a will, then her estate is likely to be shared between her three children. If she does have a will, and only names your gf, there could be a claim in the future.

She should take advice separately from you about this, as if she gives you her house, what would happen if you and your gf were to split up? Or are you looking to save care costs? If so, then the £85k shortfall is likely to be taken into account when calculating her savings.

alan44

FYI, £25k will cost you around £160pcm for a repayment mortgage.

There are a lot of potential tax issues, and yes you could have issues if she 'gifts' you something (including selling below market value) if she dies within 7 years.

This is not advice to be followed nessesarily, but I would look at the fact that the property is worth less than the threashold for inheritence tax, so that is the easiest way to get it. Otherwise you may find yourselves having to pay CGT.

You obviously get on well, so I would look at getting her to take out the mortgage, and you give her the money to meet the payments each month. This would be cheaper than a personal loan, but that would do if necessary.

She leaves the house to her daughter in her will. It can be contested, but it's unlikely to be a problem if she's of sound mind, especially as you are the ones living there with her. Your not obliged to split your estate evenly.

I'm sure there are other ways though, so this is just one option.

Dmuggy

Thanks to all who got back to me, anyone else?

PasturesNew

I think the biggest issues here will be the people management.
The other 2 children.
It will come down to your relationship with your gf, your relationship with the mother, your relationship with the other 2, their needs/wants and expectations.

While they have moved out and might appear to be quite happy, they might be assuming it is a 3-way split evens on the house. So they're sat at home now with a £30k debt and they're thinking "when the house is sold I get £33k, so debt is cleared and I get a holiday"

On the other hand, if you are lovely people and your situation is unfortunate and the other 2 have done exceedingly well financially, they might be grateful that you stayed there looking after the mother all these years and may wish you well and good luck with your windfall fortune.

Remember the saying: Where there's a will, there's a relative

So think about the people dynamics. And don't assume that if they're living in what you deem to be a lovely house that they are OK for money. At the end of the day somebody might be well and truly miffed they 'missed out'.

It's also not 2 other children - it's their spouses. Maybe the 2 others are fine, but once the spouses get wind of the fact they're not getting a bean they might feel cheated and it could all spiral out of control.

Take legal advice, check out your options, then have a meeting with everybody to air the idea and get everybody's input. If you can't face them now, it will be 10x worse after the funeral!

Dmuggy

So this is how i understand it.
If we were to buy the house for 15,000, we are liable to capitol gains tax to the tune of 40% of 85,000, which reduces on a sliding scale for a max of seven years. This will only be payable on the death of my mother in law.
If we wait until her death and she leaves the house in the will, we will pay no tax whatsoever because we fall under the minimum allowed for inheritence tax purposes.

Does the fact that this house is our main home make any difference?

Thanks in advance.

iolanthe07

This is too important for you to rely on a bunch of amateurs on an open forum. Even if it costs you a few quid you need professional advice.

Dmuggy

Thanks all for your help. I think we are going to get our names added to the deeds, and my mother in law is going to make a will leaving us her third of the house. We will then look into getting a loan or a mortgage so she can have the 15,000 that she wants for the house. I believe this way we will avoid any tax and everyone is happy.

Thanks again

Dmuggy

lifeisgood

PLEASE PLEASE do not go ahead with this until both you and your gf's mum have taken independant advice.

If you add your name to the deeds as joint tenants, then if she dies, the house will not form part of her estate but will go directly to you, no matter who she mentions in her will.

Please see a solicitor as there are so many complications, he/she can explain the options to you. The gf's mum should take independant advice.