Taking Over Mum's House

[TERFousBreakdown]

Would you or wouldn't you?

In a nutshell: mum's the freeholder for her property (worth approx. 500k, mortgaged to the extent of 100k and currently on interest only for tax reasons).

She would love me to take it over, pay out my sister (who can't afford it) and rent it back to her at the price of the mortgage payment.

Not sure if I should, TBH:

On the upside: it's a large semi in good condition, large garden, nice neighbourhood, definitely not something I'd have trouble ever renting out or selling on. There's a reasonably large amount of equity in it. And it comes with a piece of agricultural land and forest that I'm emotionally attached to (but don't have personal use for given my non-existing skill and interest in dairy farming - currently on a 20-year lease to a local farmer).

On the downside, it's in a village where I never ever plan on ever living again. I'd have to re-mortgage it to the extent of about 70k in order to pay my sister her 250k share. And with mum wanting to live in it, it'd not be generating an immediate profit for me. In fact, I might have problems selling it if I fall on hard times if she insists on staying.

Bottom line: might be a good move financially in the long term, but would tie down most of my savings and I'd have limited control over my options to re-liquify (short of selling the place I live in - arguably not an ideal move).

There's also the fact that I'd have my own mother as a tenant paying well below market value with all the potential for family conflict this entails - and, OTOH, the fact that saying no would mean going against her wishes (a whole other can of worms).

I'm really torn ... WWYD?

Buy a different house to let out if you want. Unless your mum is going to pay market rate rent then there's no reason to pick this house. Or is your mum struggling to pay her mortgage?

Also not to be crass but if your mum dies within 7 years you might still get stung for inheritance. Or if she needs to go in a home even more as the council can go back further than 7years if they think you maybe doing this to avoid paying carehome fees.

"pay out my sister (who can't afford it)"

What happens when your mum dies? You'd need to make sure any inheritance issues are clear.

I think the issue is really: mum's had a bit of a health scare and feels as though she is (though she really isn't, she'll only be 60 this year) getting on a bit.

I feel she'd like me to take it in order for her to relinquish the responsibility of home ownership (but not for the uncertainty of a tenancy, because - let's face it - renting from your daughter isn't anything like renting from another landlord).

I'm definitely NOT interested in buying to let elsewhere. Too much hassle, not interested enough in making money to bother with it. I'm on a very good 6-figure salary, so I really don't need it.

And, yes, inheritance issues are the question:

Basically, we'd have to settle the property question now (with both my sister and myself getting equal parts) and put in place a contractual framework making it clear that, when mum dies, only her remaining assets get divided and that the house question has been settled, i.e. that my sister doesn't get more than her 250k cash payment.

Your Mum can give it to both of you at no cost but if she continues to live in it she needs to pay you market rent if she wants to take it out of her estate.

If she's currently ill or might need carers fairly soon then such action might be regarded as deprivation of assets by Social Sevices if she needed care in the future.

Why don't you go and chat it over with lawyer to see what ideas they have?

Transfer of ownership of a property does not need to involve money, except legal fees.

How sound is your relationship with your mother? Because, I'd also love someone to take over my mortgage for me, let me live another 40 years in my home, maintaining it at their expense...
Seems a bit exploitative to me, but if you generally have a v good relationship, then she might not mean t to be like that.

I don't see what's in it for you other than a lot of expense. Presumably you'd need to fork out £££ in cash or take on a BTL mortgage. You'd probably end up severely out of pocket compared to investing the same amounts of money elsewhere. The only people to benefit would be your mum (big house and land to live in for peanuts) + your sister who'd get an early lump sum inheritance. You'd only get the bills and stress of maintaining another property.

If your mum can't afford the house, all she needs to do is downsize. Simples really.

Solicitor, yes, that's a brilliant idea! I'll definitely have to do that - possibly speak to a couple different ones - before even considering the whole thing.

My relationship with mum is good, actually. I can't possibly envisage her wanting to exploit me in any sense. OTOH, I very much feel that she's expecting me to take over from her as matriarch of the extended family, a role that she's held for a quarter of a century, which basically consist of acting as everyone's chief accountant and tax advisor, judge in family disputes, keeper of my irresponsible (through no fault of their own, MH issues) father and sister, and ambassador-in-chief to the American branch.

I think she feels that ownership of her stately home demi is part of the job.

So she wants you pay £100k to pay off her mortgage, but then you and your sister would jointly own the whole house and charge your mum a small rent?

Capping your sister's share at 50k doesn't sound right to me. She would end up owning 200k of a 500k house. When you do eventually sell it, wouldn't she get 2/5 of whatever it's worth at the time? A capped value doesn't seem very fair if she hasn't got the option of selling.

I would be inclined to point out to your mum that you can't financially take on all maintenance and upkeep costs in exchange for peppercorn rent. It is lovely that she wants to pass the house on (!) but she could live another 40 years. That's a lot of years of roof repairs and new boilers all coming straight out of your pocket.

The interest only mortgage payment is a bit of an artificial one, which gives a false impression of the debt outstanding and doesn't cover the true cost of owning that house. It has no relevence to you as potential landlord and guardian of the family pile.

Your mum is 59! She could potentially live their for another 30 years or so. That’s a long time to tie up your financial interests.

If the land has sentimental value to you how about getting it professionally valued and then buy that off your Mum separately? She would then benefit from a lump sum of money which she could spend, save, pay off some mortgage, share with your sister etc as she wants. You would benefit from the farmers rent. Then it would be up to her what happens with the house, she can downsize in future or do equity release but you won’t be tied in as it would obviously be a big burden, possibly for many years.

How will your mum pay rent? Can't she use that money to get her own mortgage?

Can you explain why it is interest only for tax reasons?