Buying council house pros and cons

[YaWeeSkitter]

My mum is thinking about buying her council house. She is in her late 60s and she qualifies for the maximum discount . I think she could buy it outright using her savings. Mum wants to do this to provide an inheritance for me and my brother which we appreciate but we don't want her to struggle looking after the house if repairs are needed. We also both rent. We couldn't immediately help as we are too far away to pop round. Her social landlord is good at quickly sorting out repairs and the house is currently in good order .Her rent is less than £500 a month.

She is looking to me to advise her what to do. I can only point out the possible problems with repairs as this is something I know can be problematic. But are there other things to consider ? I know she would not have rent to pay but are there other costs when you own your house outright? Any pitfalls/ bonuses?

Does your mum and savings or pension for retirement?

For me it's a no brainer, she will be £500 a month better off from the start.

Almost all the council houses in decent areas have been bought by now under right to buy.

Absolutely buy it!!

But I would get a professional in first to see if there is anything which will cause issues and see if she can get them sorted first.

There are some excellent insurance schemes ( ie plumbing, electrical etc) which give peace of mind.

She can tuck away the 500 she pays in rent to create a repair fund.

Even if she sells in 10- 15 years, it will increase in value.

For your mum personally @YaWeeSkitter the best advice is almost definitely to buy her council house, especially as she qualifies for the maximum discount. As she points out herself, it will enable her to leave an inheritance to her children which seems important to her. And she can save the £500 month in rent which will more than cover paying for jobs to be done in the house from repairs to improvements.

As a govrnment policy I don't really agree with people being able to buy council houses as it just reduces the stock even further for future generations of people who need social housing. But still, the best thing on an individual level is to take advantage of right to buy if offered to you.

I was going to agree; short term it's a no brainer and it will only increase in value, although she will have used her savings so it will take a long time to rebuild those at £500 per month. There is the long term to consider, though; when you own property it's used to pay towards your residential care if you need it, (as are savings though) and there is the possibility of eventual taxes - capital gains tax and inheritance tax - and whether these would come into play at all. When she draws her pension she MAY be entitled to help with her rent, depending on all her finances, etc etc. I think, personally, I would investigate further either with a good CAB office or a financial advisor, just to be clear on all the ramifications.

She has both her state pension and a modest works pension which cover her living expenses without having to touch her savings. Currently She does not qualify for any state help.
She isn't particularly worried about possible care home fees. As she has had cancer twice and both of her parents died early she reckons she won't need one and if she does there will be more money in the pot by then anyway ( thinking maybe 10 years hence)🤔 .
A Financial advisor may help better than I can. Any idea how she goes about accessing one ? Through her bank? Previous trade union ?

I would advise your mum to get a full structural survey prior to entering discussions about buying with the Council.
Then a) she knows the state of the house and whether it'll need anything doing in the next few years and b) if the survey brings up anything that needs doing that the Council should undertake - eg new boiler, rewiring, damp or new roof she can raise that with the Council and get that rectified prior to discussing buying.

If she wants you to advise you will need to know her full position re savings etc. If buying the house is going to wipe out all her savings I would have reservations. She will need a pot of money to cover maintenance and future repairs. Saving £500 per months on rent will help to cover this of course.

With the continued cost of living crisis, inflation etc I would want to make sure she was in a comfortable position financially. Buying the house might make her asset rich but cash poor.

As mentioned care home fees could take the lot but her savings will also be used for this. Personally I don’t have a problem with homes being sold to pay for care as if you self fund you have more choice. My mums house was sold to pay for her care and the peace of mind it gave me was worth far more than any inheritance.

Some important considerations:

• How much money in savings will she be left with after she purchases it? Has she factored in legal fees and stamp duty too?
• What is her pension income like? Does she cope with the higher cost of living energy? Can she manage any unexpected repairs, new boiler etc if needed on top?
• Re: inheritance - would passing on a lifetime tenancy be a better legacy for family members than the house to sell?
• would it be purchased freehold or leasehold? (Leasehold likely if it's a flat) if the latter look into what the council or housing association are like as a freeholder

You want a registwr d financial advisor

https://www.citizensadvice.org.uk/debt-and-money/getting-financial-advice/

Thank you @MykonosMaiden for the link.
She might still have some savings left although it depends on how much the house is valued at. I suppose thats another point - should she wait for a while to see which way the house prices go for example?

Well if it's valued on the open market and she gets a % discount then yes, waiting will benefit her.
But only if her areas sees a drop.
All house price statistics are the national average. Some places were hot (even before COVID) and still are with bidding and offers over.
Prices in some places never rose at all.
If she is in the final group then it won't really make a difference.

As others have said, on a personal level, it’s likely to be a good idea - and the £500 per month could be put into savings?

It would be worth checking whether any major works are planned for the block. These usually include things such as roof repair, replacing windows, etc.

Like you said, repairs are a big thing to consider. If it's going to take all her savings to buy the house, she is going to struggle if anything needs fixed. She'll also need to pay for boiler checks herself and get building insurance. How old is her boiler? How old is the electrics? Is the roof in good shape?

Highly unlikely capital gains tax or inheritance would come into play.

(inheritance tax I meant to say)