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BM5118
Posts: 39 Forumite
Dear All
I want to rent a house to my aunt, I'm hoping to flesh out the idea on here.
I'm trying to think of how this would work:
Thought this is a sensible place to write down my thoughts and get feedback on the pitfalls of it:
In short, my aunt is a close family member, she got divorced 2 years ago and has had to move house a few times due to landlords selling properties she lives in. She is fed up of moving and wants to be settled close to family. She has a stable job and commutes up to London from Ashford in Kent on the Highspeed line. She probably has 100k cash in the bank, and will inherit another 500k in the not too distant future I suspect. The tail end of her divorce got rather messy and destroyed both hers and her husband credit ratings. She has said she would want the option to buy the house from me when she can.
Basic math seems to work out, she is paying 1200 per month at the moment. Based on online calculators alone I can comfortably get a mortgage around this level and she would just pay the mortgage. I'm not particularly looking to make a profit off of her. She has said she is happy to contribute to the deposit too if it helps. She would also obviously want to be very involved in the process, almost certainly picking the house herself. She said perhaps we would go halves on any renovations/extensions which in theory is completely fine by me!
Personally, I work away a lot and my accommodation is provided by my employer. This would purely be a house for her, in my name giving her stability and I get someone paying the mortgage for me.
I want to make clear that good will is very much the spirit of this. Neither one of us is trying to win anything over on the other. To that end I am here to flesh out the pitfalls of this idea!!
Thanks in advance and please ask if any more info can help!
I want to rent a house to my aunt, I'm hoping to flesh out the idea on here.
I'm trying to think of how this would work:
Thought this is a sensible place to write down my thoughts and get feedback on the pitfalls of it:
In short, my aunt is a close family member, she got divorced 2 years ago and has had to move house a few times due to landlords selling properties she lives in. She is fed up of moving and wants to be settled close to family. She has a stable job and commutes up to London from Ashford in Kent on the Highspeed line. She probably has 100k cash in the bank, and will inherit another 500k in the not too distant future I suspect. The tail end of her divorce got rather messy and destroyed both hers and her husband credit ratings. She has said she would want the option to buy the house from me when she can.
Basic math seems to work out, she is paying 1200 per month at the moment. Based on online calculators alone I can comfortably get a mortgage around this level and she would just pay the mortgage. I'm not particularly looking to make a profit off of her. She has said she is happy to contribute to the deposit too if it helps. She would also obviously want to be very involved in the process, almost certainly picking the house herself. She said perhaps we would go halves on any renovations/extensions which in theory is completely fine by me!
Personally, I work away a lot and my accommodation is provided by my employer. This would purely be a house for her, in my name giving her stability and I get someone paying the mortgage for me.
I want to make clear that good will is very much the spirit of this. Neither one of us is trying to win anything over on the other. To that end I am here to flesh out the pitfalls of this idea!!
Thanks in advance and please ask if any more info can help!
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Comments
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If your accommodation is provided by your employer would they allow you to sub let.
What would happen if you lost your job?
What if you wanted to move back in and your aunt refused to move.
Not being nosey but you need to think about this a bit more.Find out who you are and do that on purpose (thanks to Owain Wyn Jones quoting Dolly Parton)0 -
Dear All
I want to rent a house to my aunt, I'm hoping to flesh out the idea on here.
I'm trying to think of how this would work:
Thought this is a sensible place to write down my thoughts and get feedback on the pitfalls of it:
In short, my aunt is a close family member, she got divorced 2 years ago and has had to move house a few times due to landlords selling properties she lives in. She is fed up of moving and wants to be settled close to family. She has a stable job and commutes up to London from Ashford in Kent on the Highspeed line. She probably has 100k cash in the bank, and will inherit another 500k in the not too distant future I suspect. The tail end of her divorce got rather messy and destroyed both hers and her husband credit ratings. She has said she would want the option to buy the house from me when she can.
Basic math seems to work out, she is paying 1200 per month at the moment. Based on online calculators alone I can comfortably get a mortgage around this level and she would just pay the mortgage. - what if she doesn't? I'm not particularly looking to make a profit off of her. - irrelevant, you will be a landlord, and will need to declare income etc. She has said she is happy to contribute to the deposit too if it helps.- Don't do this. She could in effect become a party with beneficial interest and you will not be able to evict She would also obviously want to be very involved in the process, almost certainly picking the house herself. - so a house which is unlikely to be a good business decision? She said perhaps we would go halves on any renovations/extensions which in theory is completely fine by me! - don't, as above
Personally, I work away a lot and my accommodation is provided by my employer. This would purely be a house for her, in my name giving her stability and I get someone paying the mortgage for me. - Except you will be running a business and have significant responsibilities, including but not limited to safety checks, right to rents checks, taxes
I want to make clear that good will is very much the spirit of this. Neither one of us is trying to win anything over on the other. To that end I am here to flesh out the pitfalls of this idea!!
Thanks in advance and please ask if any more info can help!
Either buy a property which is in demand for the local market, or just buy jointly with her.
This halfway house of let/own is not good0 -
Dear All
I want to rent a house to my aunt, I'm hoping to flesh out the idea on here.
I'm trying to think of how this would work:
Thought this is a sensible place to write down my thoughts and get feedback on the pitfalls of it:
In short, my aunt is a close family member, she got divorced 2 years ago and has had to move house a few times due to landlords selling properties she lives in. She is fed up of moving and wants to be settled close to family. She has a stable job and commutes up to London from Ashford in Kent on the Highspeed line. She probably has 100k cash in the bank, and will inherit another 500k in the not too distant future I suspect. The tail end of her divorce got rather messy and destroyed both hers and her husband credit ratings. She has said she would want the option to buy the house from me when she can.
Basic math seems to work out, she is paying 1200 per month at the moment. Based on online calculators alone I can comfortably get a mortgage around this level and she would just pay the mortgage. I'm not particularly looking to make a profit off of her. She has said she is happy to contribute to the deposit too if it helps. She would also obviously want to be very involved in the process, almost certainly picking the house herself. She said perhaps we would go halves on any renovations/extensions which in theory is completely fine by me!
Personally, I work away a lot and my accommodation is provided by my employer. This would purely be a house for her, in my name giving her stability and I get someone paying the mortgage for me.
I want to make clear that good will is very much the spirit of this. Neither one of us is trying to win anything over on the other. To that end I am here to flesh out the pitfalls of this idea!!
Thanks in advance and please ask if any more info can help!
Firstly you will have an issue obtaining a mortgage where the deposit is coming from someone, the only person, who will occupy the property but not be party to the mortgage. You will also struggle to obtain a mortgage for a property you won't live in whilst not already owning your own home elsewhere.
Whilst you might consider the payments your aunt makes to be mortgage payments, HMRC will see it as rent and therefore be taxable income.
I don't know if you are a First Time Buyer or not, if so you will lose your First Time Buyer status for things like SDLT relief and HTB/LISA bonuses.0 -
Are you looking to get a proper buy to let mortgage then? I asked a similar question on here last year and I think you need a special type of BTL mortgage called a regulated BTL if you are letting to family members. This is harder to get and comes with a load of extra checks (and will probably cost more).
On re reading your post it sounds more like you are planning to do it under the radar unless I've misunderstood. If that's the case and if you get caught you could run into all sorts of issues like having the house repossessed, and trouble with HMRC if not declaring rental income.
What about council tax? Who would be paying that?
Also what if your aunt decides she's no longer paying you... How would you get her out?
And having her contribute money for renovations sounds like a minefield in the future.as she is likely to want a discount on rent or reimbursing at some point.
Personaly I would avoid renting to family unless you think you could evict them if the time came,.and you are likely to fall out with them at some point. That's why banks don't really like these type of arrangements very much.
I was planning to rent my place to my brother (officially) and after I did my research I decided against it.0 -
How about you and your aunt consider buying and owning together and with a joint residential mortgage? 50:50 on all costs and mortgage payments and 50:50 if you sell in future - or you could buy the other out. I know you said your aunt does not have great credit but if you find out then there may be options.
Do you live near each other?
If your accommodation is provided by your employer it could benefit you to invest in a home and get on the housing ladder but as stated you will lose your first time buyer status. If you want to buy again in the future without selling this shared property you will have to pay an extra 3% stamp duty and may face affordability issues as you will already be on this mortgage.
If the property is your home you won’t have the tax/landlord obligations or capital gains tax to pay when you sell.
You may want to own as tenants in common rather than joint tenants if you would rather leave your share to someone else rather than each other if you were to die.
Tlc0 -
Your aunt has a good job and £100k in the bank. You say she has a poor credit rating - but if she has £100k she presumably has paid off all of her debts? (And if not, why not?)
£100k would be a decent deposit on a house - why can't she buy a house in her own name?
What do you gain from this? It sounds to me like you are taking all the risks (house in your name, you're responsible for being the landlord etc etc) and she gets all the benefit (house she's chosen, option to buy). What if in the end she doesn't want to buy the house off of you, just wants to continue renting from you - what will you do when you want to buy a place of your own?
We always want to help family, and it's nice to be nice - but sometimes it's better to just say no. As someone wiser than me once said, when a Gentleman's Agreement goes wrong, you find there are no Gentlemen (or Ladies) and no Agreement.No longer a spouse, or trailing, but MSE won't allow me to change my username...0 -
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You would likely need to do a Buy to let mortgage (20-25% deposit).
You would need to declare the income and pay tax on it.
I think you would need to pay higher rate stamp duty and there would be no help if you go and purchase your own property down the line (ie HTB ISA, stamp duty exemption for first time buyers etc).
If you go down this route, treat it as a business transaction.
Draw up a contract - who pays what. What happens if there is a disagreement? Does she pay the going rate for the purchase price? If not, how will you work it out - bare in mind any home improvements that have been carried out and who paid for them. Also any benefits you may have lost when you come to purchase your own home, any capital gains tax, income tax, accountancy fees you will have paid whilst doing it.
In theory it could work. In practice, you both need to put the time in at the outset to get it right no matter how much you trust each other.I am a Mortgage AdviserYou should note that this site doesn't check my status as a mortgage adviser, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice.0 -
What could possibly go wrong?
You may suddenly meet The One, and want to marry & settle down. Oops, you've already blown your First Time Buyer bonuses on Auntie.
Your job may cease, relocate or change terms & conditions on you to such an extent that paying a mortgage could impair eating.
Your Aunt may suddenly become unwell, incapable of paying her rent or even living at the property. If you are close by, you'll get dragged in, if you are working out of the country you will also still get dragged in.
Your Aunt may take up with some new life partner of whom you utterly disapprove & start spending all her time & money at their advice. Like not paying you, as family are the devils own job to evict.
(The mortgage company might be a tad intrigued if you do not treat Aunt as a tenant - BTL mortgages are ruthless on No Family. Did you plan to become de facto a landlord? With all the inspections & obligations & tax issues arising?)
What happens if you go under a bus? Have you a Will that says sell the house to Aunt but at a market value & if she can't afford it, too bad?
In short, I'm less than convinced this is a brilliant idea, but that would be just my opinion. Please consider a chat with a mortgage broker & a solicitor before one with your Aunt?0 -
Follow the rule. Never let to family or friends.
There is a good reason for this. It never ends well it is like lending money.
Look at it from this point of view. Do you want to end up hating your aunt over something that happens when you let a house to her? If not don't do it.0
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