Buying a property for someone else.

[StrawbHead]

I want to buy my mum a retirement property. She owns a house outright.

Me and DP own our house outright too.

Can I get a mortgage to buy my mum a retirement property? Are there any penalties or fees because we would own a second property? Would it matter that the property would be in my name, but my mum would be the one living there? I wouldn't charge her rent.

The plan would be to buy the retirement property first. Then sell my mum's current house once she's all moved in and settled. So, probably within a year.

I'm really struggling to find information online about the rules for this particular situation because most advice is second properties for yourself, or buy-to-let property rules.

Any advice anyone has would be so helpful. I'm at my wits end - my mum can't cope with her current house but is tying herself in knots about a retirement property.

I did something similar without looking into the rules so would advise seeing financial advisor first. I bought a house with a mortgage that needed a lot of work doing on it so didn't sell my own til done with intention of then paying mortgage off once mine was sold. Changed direction a little at that point bought another little house for parents, moved them in then sold theirs to make it less stressful for them (all the time footing the bill for said mortgage). Once theirs sold I paid off mortgage but my name stayed on their deeds. Things I didn't realise til years later:-

1. You have to pay full council tax on an empty house.
2. In a few months when it sells I'm going to have to pay capital gains tax on it as was partly in my name & deemed second home despite not being.

I'm sure there will be other things I didn't know that will come to light but not aware of yet. Was all done in good faith but ignorance and I'm sure an accountant would have known better as I'm going to be thousands of pounds out of pocket for doing a good turn.

That's all so useful, thank you. If your parents' property had been in their name only, would you still have to pay capital gains tax? I mean would the capital gains tax come from their estate? I'm assuming from your post that your parents have passed away. Sorry for your loss.

It sounds like you were trying to do the right thing by them, like I am. Families eh?!

Why would you need to buy her a property if she already owns one? Surely she just sells that and uses the money to buy another?

But you’re not really going to be out of pocket are you? The house you bought will have increased in value far above any interest the money used for the purchase would have gained. You just won’t have made as big a profit as you expected.

Watch out for capital gains tax etc. Also if you want assisted living, or a orice aimed at the over sixties, the property might need to be in her name.

I know nothing but my starting point would be to phone up one of those retirement village places where you buy a bungalow on their site and they provide cleaning and support eg nighttime emergency medical care. Their management company might have interesting ideas.

I know nothing but my starting point would be to phone up one of those retirement village places where you buy a bungalow on their site and they provide cleaning and support eg nighttime emergency medical care. Their management company might have interesting ideas.

Look very, very carefully into this if you decide to go ahead. The villages are nice ideas, but they have high service fees, which typically carry on even after death and make them extremely difficult to sell on.

I wouldn't recommend she buy a retirement place. The service charges are extortionate, and when you inevitably have to sell it she/her estate will still be liable to pay those charges, and often they languish on the market for years.

Far better to rent one. Easier to move her in and either sell the house or rent it out.

You would be better taking out a mortgage on your house, and using cash to buy the retirement house. It is very difficult to get a btl mortgage for a family member to live in. And I'm fairly sure it would be classed as a btl, even if you weren't charging rent.

You will have to pay an additional 3% in stamp duty.

DP struggled to get a mortgage that would allow this, so I think the first step would be to talk to a broker. But yes it would count as your second home.

The service charges are no joke if you are thinking of assisted living .

Thank you so much for the comments, its so useful.

Good point on the fees, I had already checked these out but I wasn't aware that they carried on after death 😬Yikes.

Renting is an interesting point. I totally get the upsides to it and it seems really appealing. I'm not too sure if my mum would go for it though. The other issue (and forgive me for sounding unkind) is that she's fairly young so might end up living in this retirement property for a decade or more, which is a lot of money to be paying with nothing to show at the end. If I was confident she only had a few years left (again, it sounds unkind but we have to think practically), I'd definitely opt for renting.

@Soontobe60 "Why would you need to buy her a property if she already owns one? Surely she just sells that and uses the money to buy another?"
I don't think she'd be able to cope with the stress of selling one property while also buying another. She's never sold/bought property before (her current house was bought off the council in the 1980s so much more straightforward). She's in poor health so it'll take her a very long time to sort out her current house. Plus, given her health, she wouldn't cope very well with viewings. The best scenario all round is for her to have a property to move into and to keep the current house so she can sort it and sell it at her leisure.

That’s a mad way to do things you will incur all sorts of costs and complications.
She should find a suitable property (or you find one for her) and help her to sell hers at the same time as buy somewhere else. Estate agent can organise an open day and you can move mum out for that day. She’s going to needs lot of help and pay for professional packers and movers. If her place is in poor condition that’s ok it will be reflected in the price.

The other issue (and forgive me for sounding unkind) is that she's fairly young so might end up living in this retirement property for a decade or more, which is a lot of money to be paying with nothing to show at the end.

You could rent her current property out which would presumably increase in value so she'd still have something to show, or sell and invest the proceeds - might be possible to live off the interest?

Yep, I know its mad. I just don't see her coping with buying/selling at the same time. And my fear is that things would get complicated, as they inevitably do with property buying/selling, and she'd just give up on the whole thing and stay put in her current house that she can't really cope with.

Renting out is a good shout, thanks. I don't feel super comfortable with renting out property and being a landlord but its her property so her choice I guess.

But you could manage so much of the stress for her. You could interview a couple of estate agents together and pick one together that is told to deal with you though it is her property.
Owning 2 properties is expensive. Extra stamp duty has to be paid & many more costs. At the very least it may be worth considering her renting for a year so that the property can be sold before buying another one.

@StrawbHead no if property stayed in parents name I wouldn't have had to pay capital gains tax. It would, however, be liable for inheritance tax if their estate was over a certain amount but I think that is at least over £350,000 which would not be applicable as they weren't that rich.

Capital gains tax when you sell it on any increase in value after you buy it and the extra 3% stamp duty as it is an additional property

@Soontobe60 it's not my money that I bought the house with, it was a mortgage taken out on my own property that originally paid for it and my dad gave me the money back when eventually theirs sold and I paid off that mortgage. I know it's complicated🙄seemed like a good idea at the time😂 and I'm not having the money from the house, so yes, I will be out of pocket which is why I'm advising op to get professional advice!

@StrawbHead I totally understand that your mother couldn't cope with buying and selling at the same time, it is stressful which is why I did it the way I did, they were in their 80s. I second the idea of renting a flat, perhaps you could persuade her by suggesting it could be temporary until her house is sold to make it easier on her and then you can look to buying something else for her once the cash is released. By that time she may have settled into the rented flat and be happy with it anyway. Housing association Warden controlled or extra care housing are relatively easy to get (just contact any nearby and ask about vacancies, view and see if they suit, for obvious reasons they aren't usually in short supply, I have a relative in one, they had three to choose from and reasonably priced) or you can privately rent the managed properties like Mccarthy stone for older people (over 55s/60s if she's that age). I did go down the road of renting out the house for 6 months but I personally didn't think it was worth all the hassle and sorting out paying tax on the income was a two year nightmare😳
I work with older people and have heard some nightmare stories of people buying retirement apartments with huge service charges and then being unable to sell after their parent has died but still having to pay service charges, council tax ect so I would be very wary of those. Hope all goes well💐

What age is she and does she have special requirements, i.e. accessible loo, shower etc. and can she get up stairs?

Would it be better to have her current house adapted to her needs to allow her to live downstairs only.

Otherwise if that's not practical, I would think of a ground floor one bed flat, not a retirement one. Plenty of time to think about retirement places a few years down the line.

You can get alarms, neck buzzers and a daily or frequent carer/housekeeper. She may also be entitled to some benefits. But maybe not quite yet depending on her health status.

I'm thinking of the same thing OP - and thinking if my Dm lives for say 20 years there, I'll make sure it's a lovely place that I can then move in to :)

Capital gains and stamp duty are the worst elements. I won't suggest renting to my Dm cos of the emotional loss /upset of maybe two moves - out of existing much loved but now unsuitable house, to rented flat (which tend towards the miserable ime) to own, more suitable place, then poss to a care home. Good god it's miserable.