Can I buy a % share of my mothers house?

[Dubfella]

Hi,
I was wondering if you could advise me.

My elderly mother owns and lives alone in her 4 bed family home in South Dublin, she has no mortgage and has been living in the house for 45 years. She wants to downsize and at the same time I want to buy a house for my family as we have been renting for years and we want to start paying a mortgage rather than renting. The value of her house is cir. €700k so its too expensive for us to buy, the max loan Ulster Bank have approved us for is €450k + 20% deposit which we have saved (we are second time buyers).

Could we buy an approx 75% share in her house (€525k)? This would allow us to start paying off a mortgage and allow my mother to buy herself a smaller house. It would keep the house in the family which everyone fully supports. The 25% share that she would still own would go back into her estate when she passes and at this time we would either buy her share out or sell the house and give her estate 25% of the proceeds. It means we can start building equity in something while staying in the family home close to my mother so its a win win for everyone.

My mother wouldn’t expect us to pay rent for her 25% share, she would keep a room in the house for when she wants to come and stay with us.

We would get contracts drawn up to agree all of this.

Would the bank support this and what are the legal and tax implications for us and her?
Thanks.

 

[MrEarl]

Hello,

Nice in theory, but ...

I do not believe that a Bank will lend you money based on 75% of the house, so you would have to get your mother to agree to pledge her remaining 25% share as security, to facilitate the Bank obtaining a mortgage over the entire property. Even then, the Bank may be reluctant to give a long term mortgage given your mother's age.

What happens if something changes in a few years time - say for example if you are no longer able to pay the mortgage (and property values have dropped so the entire house value is needed to clear the debt), or if you need to move to another location and want to sell the house, but your mother does not etc ? Also, what if your mother needs the remaining equity and you are not in a position to buy her out when she needs the funds ?

Family members may all mean well, but sadly the risk of a dispute breaking out about an arrangement like this at some point in the future is probably high.

You are quite right to mention getting contracts signed up and this paperwork would need to be perfect. Furthermore, depending on your mother's age, is there the possibility that someone could claim that she is not in a fit state to be entering into such an arrangement ? ..... I would be getting some legal advice and if I was going ahead with this, I think I would want all of her other children to be signing the documentation as witnesses to it, or swearing affidavits to confirm that they knew about the arrangement and were supportive of it etc.

My initial reaction is that there is no particular tax concern for either party given it's a principal private residence, but that is advice you need to get from a suitable professional.

 

[Bronte]

Have you siblings and do they think this is a good idea?

 

[Dubfella]

Have you siblings and do they think this is a good idea?

Yes, i have 3 siblings and they all fully support the idea as does my mother.

 

[Bronte]

I can't see a bank giving you a mortgage in these circumstances. It would be better for you to buy the house from her for the amount you can borrow. And to have a separate contract that you owe her the 25%. You really need to talk to a solicitor on what can or cannot be done. Also a mortgage broker should be consulted. Whatever you do should be in writing and all your siblings made aware of the arrangements. Just for family harmony. Also an auctioneer should value the property. Which would in any case have to be done for a mortgage.

 

[twofor1]

Could we buy an approx 75% share in her house (€525k)?

Could you not buy 100% for the reduced price of €525K ?

Assuming as it stands that all is to be split equally between the 4 siblings on your mothers passing, she could change her will to reflect the fact that you would have already got an advance of €175K of your inheritance.

 

[Dubfella]

Nice in theory, but ...

Thanks, all good points. To please the bank it coukd be the case that the entire house is signed over to me and i do i IOU to my mum or her estate but as you said could be complicated but worth investigating. Ill get some legal advice.