House idea (no, don't groan, please)
Discussion
Yippee, another thread about mortgages and the like 
So, I'm looking for a bit of advice. I'm currently 24, live with my mum and sister and earn about £32k a year. Outgoings are about £700-£800 a month. I really need to start making the move out of 'home' but the current house prices are kind of intimidating. However, I've come up with this half baked idea. You see, my mum used to own this house, until her and my dad got divorced. Within about 5 years she'd ran up a load of debt (god knows on what, nothing to show for it) and this ended up with her selling the house for a measly £70k (just before the boom) to some shady "sell us your house and rent it back off us" company in order to pay off the debt. She kept it a big secret and said nothing (rather than asking me if I wanted to buy it) and it was only by chance I found out last year.
Anyway, she currently pays £500 a month rent (what a fantastic deal they made her) and one or two times she's been given the option to buy the house back (how kind), however, as she has poor credit history this isn't an option for her. I however have a fairly good credit rating so the way I see it, perhaps I should make an offer to the landlord and instead she can continue paying me the rent. They'd probably want about £100-£110k. I figured she could continue as normal, I'd be on the property ladder, I'd save for a year or two then look to buy my own place. My original idea was to take out a 25 or 35 year mortgage. However, I told my dad my idea and he was interested in backing me. He suggested a joint mortgage (his credit rating is good as well), my mum continues paying £500 a month rent, me and him add extra to that (£150-£200 a month extra each) and take it out over 15 years. The idea being that at the end of 15 years the house would be paid and I would remortgage and buy him out (making him some profit, obviously I should have equity in it).
Does this sound like a reasonable idea? The only thing I'm not sure about is how to approach getting a mortgage. Would we just take out a 'normal' mortgage (as I'd be living there) and make out we're both paying £400-£500 a month each (and omitting my mum would be there contributing). I'm not quite sure, it comes across as 'buy-to-let' bus as it's family and I would live there I'm not exactly sure how it works. Suggestions?
Thanks
So, I'm looking for a bit of advice. I'm currently 24, live with my mum and sister and earn about £32k a year. Outgoings are about £700-£800 a month. I really need to start making the move out of 'home' but the current house prices are kind of intimidating. However, I've come up with this half baked idea. You see, my mum used to own this house, until her and my dad got divorced. Within about 5 years she'd ran up a load of debt (god knows on what, nothing to show for it) and this ended up with her selling the house for a measly £70k (just before the boom) to some shady "sell us your house and rent it back off us" company in order to pay off the debt. She kept it a big secret and said nothing (rather than asking me if I wanted to buy it) and it was only by chance I found out last year.
Anyway, she currently pays £500 a month rent (what a fantastic deal they made her) and one or two times she's been given the option to buy the house back (how kind), however, as she has poor credit history this isn't an option for her. I however have a fairly good credit rating so the way I see it, perhaps I should make an offer to the landlord and instead she can continue paying me the rent. They'd probably want about £100-£110k. I figured she could continue as normal, I'd be on the property ladder, I'd save for a year or two then look to buy my own place. My original idea was to take out a 25 or 35 year mortgage. However, I told my dad my idea and he was interested in backing me. He suggested a joint mortgage (his credit rating is good as well), my mum continues paying £500 a month rent, me and him add extra to that (£150-£200 a month extra each) and take it out over 15 years. The idea being that at the end of 15 years the house would be paid and I would remortgage and buy him out (making him some profit, obviously I should have equity in it).
Does this sound like a reasonable idea? The only thing I'm not sure about is how to approach getting a mortgage. Would we just take out a 'normal' mortgage (as I'd be living there) and make out we're both paying £400-£500 a month each (and omitting my mum would be there contributing). I'm not quite sure, it comes across as 'buy-to-let' bus as it's family and I would live there I'm not exactly sure how it works. Suggestions?
Thanks
cazzer said:
More to the point....wouldnt the house you own have your mother and sister living in it?
For the next 15 years. Til your 39?
For the next 15 years. Til your 39?
Yes, but my mum would have to live somewhere would she not? Despite whether I owned it or someone else did she'd have to pay rent either way. My sister wouldn't be leaving for at least another 5 years (she's 13).
I wouldn't be here forever, maybe another two years max whilst I save like mad.
If at some point within that 15 years my mum moved out, and assuming I'd bought another house, I would just let it out as normal as anyone else may with a second house.
Would there not be income tax implications of renting to your mother - especially if she is paying you the equivalent of a Commercial Rent rather than just lodging and housekeeping.
Also, the deeds of the property might need to be checked to see if such an arrangement is allowable.
finally, there could be Capital Gains issues to consider if the property has been let commercially during your period of ownership.
Also, the deeds of the property might need to be checked to see if such an arrangement is allowable.
finally, there could be Capital Gains issues to consider if the property has been let commercially during your period of ownership.
Eric, doesn't income tax only apply providing he's profiting from it? On a monthly basis he's actually losing money as him and his father are having to top up the amount gained in rent to fund the mortgage. Or doesn't it work like that?
As to capital gains tax, I suspect you're right as it's being rented out commercially.
As to capital gains tax, I suspect you're right as it's being rented out commercially.
Edited by Phil Hopkins on Wednesday 19th July 09:48
It depends on what element of the loan repayment is made up of interest.
The full loan repayment normally consists of capital and interest. Only the interest element can be offset against rental income. Also, since the property is partly used as a main resident of the owner, the interest claimable would be restricted to that portion which relates to the rented out part of the property.
The full loan repayment normally consists of capital and interest. Only the interest element can be offset against rental income. Also, since the property is partly used as a main resident of the owner, the interest claimable would be restricted to that portion which relates to the rented out part of the property.
Not quite sure why you need to go in with your dad, assuming the company will sell you the house even a 100% mortgage for £110,000 should be well within your means as you could get up to about £160,000 on your salary.
The fact your mum pays you rent is ok, but £500 per month would need to be declared, above £4250 per annum it has to be.
I can tell you more and give you some quotes but not on a public forum. Email me if you wish.
The fact your mum pays you rent is ok, but £500 per month would need to be declared, above £4250 per annum it has to be.
I can tell you more and give you some quotes but not on a public forum. Email me if you wish.
The £4,250 is the amount allowable under the Rent a Room scheme. This was brought in to assist those who had lodgers and who were not returning the lodger's rent for tax purposes (as they were originally oblged to do). This basically de-criminalised people in these cirmustances.
The Rent a Room scheme does not really apply to family members - but Commercial Rents and how they are returned is nothing to do with the familial relationships between the parties involved.
The Rent a Room scheme does not really apply to family members - but Commercial Rents and how they are returned is nothing to do with the familial relationships between the parties involved.
Why not use your good credit rating to get a joint mortgage with your Mother and Sister and get the house and life insurance and wills sorted so that if there's ever a death, the others are okay. Don't do anything joint with your dad.
Let me get this straight : You must take home about £1900 a month, and you contribute £150 ? You must be saving £1000 a month. You sound like a bit of a t
t (No offence intended) perhaps.
Let me get this straight : You must take home about £1900 a month, and you contribute £150 ? You must be saving £1000 a month. You sound like a bit of a t
t (No offence intended) perhaps. 
Smirnoff: Thanks for the offer, will keep it in mind when I'm more certain of what's going to happen.
Why? Because she has a terrible credit rating, and my sister is 13 so hardly going to contribute much, don't you think?
I only considered going joint with my dad as it would reduce the costs leaving me with more money for when I get my own place.
I'm a tt? Why, because I'm considering buying the house my mother rents and letting her rent it from me? Why does that make me a bad guy? If I didn't buy it, she'd still be renting it, just paying the money to some greedy property agency. The bottom line is this, the house has been in our family since it was built. It belonged to my great grandparents, my grandparents and then was given to my mother and father when they were married so they didn't have to worry about a mortgage. When they got divorced my dad was entitled to half the house but he declined because he wanted the children (me, my brother and my sister) to have an inheritance. Unfortunately he didn't get this put in writing but this was his reasoning for not taking his half. Cue 5 years later and the house has been sold and my mother refuses to say where the money went. She doesn't drive so there's no TVR sat outside, it doesn't have any flash designer furniture, it's just an average family house. There's nothing to show for where the £70k went and as far as I'm aware she doesn't have a crack / coke / smack problem. All I'm trying to do is some damage limitation. I don't want her as part of the mortgage because she has a scumbag boyfriend, who if became a permanent resident, may be entitled to a share should she drop dead. No thanks. So what is so wrong with my plan? Is it that my mother would be paying my mortgage in the way of rent? In about 11 years time she'll have paid back in rent the amount she sold the house for, everything after that will be profit for the landlord. With my plan I'd hope it would be paid off in say 15 years, I buy my dad out, obviously this would mean remortgaging but say over 25 years the repayments should be quite low (enough for me to manage myself I should hope), then my mum can continue living there rent free. When she finally shuffles off the mortal coil then we'll once again have a property that can be passed on (to my brother, sister, rent it and divide the profits, etc).
said:
Why not use your good credit rating to get a joint mortgage with your Mother and Sister and get the house and life insurance and wills sorted so that if there's ever a death, the others are okay. Don't do anything joint with your dad.
Let me get this straight : You must take home about £1900 a month, and you contribute £150 ? You must be saving £1000 a month. You sound like a bit of a tt (No offence intended) perhaps.
Let me get this straight : You must take home about £1900 a month, and you contribute £150 ? You must be saving £1000 a month. You sound like a bit of a tt (No offence intended) perhaps.
Why? Because she has a terrible credit rating, and my sister is 13 so hardly going to contribute much, don't you think?
I only considered going joint with my dad as it would reduce the costs leaving me with more money for when I get my own place.
I'm a t
t? Why, because I'm considering buying the house my mother rents and letting her rent it from me? Why does that make me a bad guy? If I didn't buy it, she'd still be renting it, just paying the money to some greedy property agency. The bottom line is this, the house has been in our family since it was built. It belonged to my great grandparents, my grandparents and then was given to my mother and father when they were married so they didn't have to worry about a mortgage. When they got divorced my dad was entitled to half the house but he declined because he wanted the children (me, my brother and my sister) to have an inheritance. Unfortunately he didn't get this put in writing but this was his reasoning for not taking his half. Cue 5 years later and the house has been sold and my mother refuses to say where the money went. She doesn't drive so there's no TVR sat outside, it doesn't have any flash designer furniture, it's just an average family house. There's nothing to show for where the £70k went and as far as I'm aware she doesn't have a crack / coke / smack problem. All I'm trying to do is some damage limitation. I don't want her as part of the mortgage because she has a scumbag boyfriend, who if became a permanent resident, may be entitled to a share should she drop dead. No thanks. So what is so wrong with my plan? Is it that my mother would be paying my mortgage in the way of rent? In about 11 years time she'll have paid back in rent the amount she sold the house for, everything after that will be profit for the landlord. With my plan I'd hope it would be paid off in say 15 years, I buy my dad out, obviously this would mean remortgaging but say over 25 years the repayments should be quite low (enough for me to manage myself I should hope), then my mum can continue living there rent free. When she finally shuffles off the mortal coil then we'll once again have a property that can be passed on (to my brother, sister, rent it and divide the profits, etc). Edited by Oakey on Wednesday 19th July 12:51
Clearly there's some un resolved anger and I never meant to stir it up, my calling you a tt was purely for effect and clearly uncalled for.
Might I suggest you need to move on, get disentangled from both parents for a while and start living your own life. If you want to do the Buy to Let thing, do it, but not with your mum as a tennant. If you want your own space, go and get it.
t was purely for effect and clearly uncalled for. Might I suggest you need to move on, get disentangled from both parents for a while and start living your own life. If you want to do the Buy to Let thing, do it, but not with your mum as a tennant. If you want your own space, go and get it.
jacko lah said:
Clearly there's some un resolved anger and I never meant to stir it up, my calling you a tt was purely for effect and clearly uncalled for.
Might I suggest you need to move on, get disentangled from both parents for a while and start living your own life. If you want to do the Buy to Let thing, do it, but not with your mum as a tennant. If you want your own space, go and get it.
t was purely for effect and clearly uncalled for. Might I suggest you need to move on, get disentangled from both parents for a while and start living your own life. If you want to do the Buy to Let thing, do it, but not with your mum as a tennant. If you want your own space, go and get it.
No worries. Not angry as such, peeved perhaps. As a friend of mine says, it's rather like an episode of eastenders. All I want to do is try and get back what belonged to the family and attempt to provide some security in the future for my brother and sister.
A bit confused here,
So you buy the house with a 25yr mortgage and let to your Mother, ok,
You will continue you continue to live and pay for the mortgage from the rent your mother pays and from yourself. Does this add up to pay for the repayments?
My concern would be that you will want your own place and wont have enough equity/income to fund another mortgage when you move out.
Personally, I would aim to do it in the reverse order you suggest. I would secure a property for myself and then if and when you have enough money look to help your Mother by buying the property she is in at a later date.
I suspect you wont have enough funds to do both as your expenditure allways grows to meet your income, you will get married / other demands on your money.It is nice/good to try to help your parents but you be careful about tying up your funds/assest in a property someone else will live in and you wont beable/want to get out.
If it was a normal buyto let, you can always give notice and live in the property but you wont be abnle to here.
My parents helped out one of their sisters and the sister lives in the property paying rent which part covers the mortgage, trouble is they cant now realise the funds 6 years later in the property as the aunt wont have anywhere to live (family house for generations as well) the main capital money is stuck until the aunt dies/moves out.
So you buy the house with a 25yr mortgage and let to your Mother, ok,
You will continue you continue to live and pay for the mortgage from the rent your mother pays and from yourself. Does this add up to pay for the repayments?
My concern would be that you will want your own place and wont have enough equity/income to fund another mortgage when you move out.
Personally, I would aim to do it in the reverse order you suggest. I would secure a property for myself and then if and when you have enough money look to help your Mother by buying the property she is in at a later date.
I suspect you wont have enough funds to do both as your expenditure allways grows to meet your income, you will get married / other demands on your money.It is nice/good to try to help your parents but you be careful about tying up your funds/assest in a property someone else will live in and you wont beable/want to get out.
If it was a normal buyto let, you can always give notice and live in the property but you wont be abnle to here.
My parents helped out one of their sisters and the sister lives in the property paying rent which part covers the mortgage, trouble is they cant now realise the funds 6 years later in the property as the aunt wont have anywhere to live (family house for generations as well) the main capital money is stuck until the aunt dies/moves out.
Gassing Station | Business | Top of Page | What's New | My Stuff