Mortgage on parent's house - deposit?

[hopeless123]

In the next 3 years my mother's mortgage needs to be fully repaid or the house sold as she has an interest only mortgage and no savings plan to repay the mortgage.

My husband and I would like to buy the house with a repayment mortgage and build an annexe for mother to live in.

The house is worth aprox £190,000 and the mortgage is £135,000. We have £30,000 savings currently. We were considering paying this straight off her mortgage now to save on interest but what I would like to know is will the bank need us to have a cash deposit in order to grant the mortgage or will it be OK that we would effectively be buying a house worth £190,000 for £105,000 hence an OK LTV ratio?

Are we better off keeping hold of our savings (and adding a bit in the next 3 yrs) and coming to the bank with a decent cash deposit?

The equity in the house should count as the deposit.

I'd suggest speaking to a solicitor if I have got this right, you will be buying the house for significantly lower than market rate? Just make sure that if anything happened eg your mum needed to go into a care home, that it wouldn't be classed as willful deprivation of assets. I don't know all the details (ex mortgage adviser but it's not an area I would ever get involved in).

RockChick you are right there would be implications if Mother needed to go into a care home (is it 7 years after we buy the house?) but it's a risk we are willing to take as she is still young - 60s - and I would hope that by living in an annexe attached to the main house that she could maintain her independance for as long as possible. I would happily look after her for as long as she wanted (we have discussed this).

The alternative option is that we keep on renting or buy a flat which is too small for our needs (2 children, 1 on the way) and Mother goes into rented as well. Rented is fine, but we have had to move every 12 months for the past 4 years which is getting a bit annoying and disruptive for the children!!!!!

Just wanted to check you were aware of it! Rather than wait the 3 years, would it not be worth buying it now? I'm presuming she isn't tied in to a rate, but at least that way it's making a dent already into the 7(?) years necessary, just in case. Definitely sounds like a better option to buy the house off her rather than your alternatives!