Mother selling her house to buy a bigger house with her daughter and SIL

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Sherri

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Hi, just looking for some advice on behalf of my older sister. She is 68, a widow and owns her property outright. Her daughter and son-in-law (and 2 small children) also live in the property with her. They want to sell this property and move to a bigger house where they will have more space/privacy/bigger garden etc. My sister is willing to sell her home (worth approx. 800K) and put this value towards the new house. My niece and her husband would then take out a mortgage for the remainder (approx. 500K). My sister would ask for a provision to live in the property until she dies. The house would then be fully owned by her daughter and son-in-law.

1) Would my sister be able to put her name on the deeds along with her daughter and son-in-law?
2) What would happen if my niece and her husband split up?
3) Would there be any other complications with this arrangement i.e. tax implications?

I have advised my sister to seek legal advice before going ahead. I just want to raise this query here to get some opinions/feedback first. Thanks.
 
If the daughter and son in law can raise a mortgage of €500k, why don't they buy a house of their own and keep things simple.

The marriage break up is a real problem which would cause ructions.

The other issue is the mother falling out with her daughter or son in law.

Having a watertight legal agreement might give her legal rights, but an elderly lady enforcing them would be another thing.

There would also be issues with the Fair Deal - not a deal breaker, but just bear it in mind.
 
Thanks Brendan. I have discussed with with my sister but she doesn't want to live on her own. She likes the idea of having her daughter and her family living with her albeit with more of a separation within the home i.e. small separate living area with a bedroom/bathroom/kitchenette for her own use only. As you rightly point out, the issue would be if there is a falling out or if the couple split up. If they did split, I presume her son-in-law would be entitled to ask for the house to be sold in order to get his share i.e. a third of the value?
 
Sherri said:
I presume her son-in-law would be entitled to ask for the house to be sold in order to get his share i.e. a third of the value?
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Yes, but as in all these cases, he would probably start with "This is my house - you move out if you wish".

If they go down this avenue, and I really don't think that they should, then the mother should lend the daughter and the son the €800k via a second mortgage, although the bank providing the €500k might not like that.

Then if the house is sold, the mother is repaid in full.

But it must be by a legally binding mortgage. If it's just an understanding, then he will claim it was a gift.

The mother's name will also be on the mortgage.

It's so messy.
 
Sherri said:
My sister is willing to sell her home (worth approx. 800K) and put this value towards the new house. My niece and her husband would then take out a mortgage for the remainder (approx. 500K). My sister would ask for a provision to live in the property until she dies.
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Has your niece approached a bank about getting a mortgage on a property that the mother has a lifetime interest in
I know when I was thinking about moving in with my MIL 20+ years ago who had a lifetime interest in the property
The bank was not comfortable with this situation and I was only looking for a bridging loan while we renovated the property
I can only presume nowadays it would be a major red flag from the banks prospective
 
The potential scenario here is that the house is going to cost €1.3m., €800k of it is funded by your SiL and €500k via her daughter, her husband and a mortgage.

If her name is not on the deeds and she is not an owner of the new house, then in effect she is handing over €800k in cash to her daughter. That almost certainly has tax implications.

If her name is on the deeds, then any bank is going to have an issue giving a mortgage to someone who, in effect, is only a part-owner of the property. I think that will be a struggle. Your SiL will not get a mortgage at 68.

Also, is the daughter an only child and is there a risk of family, in effect, being written out of any potential inheritance?.

Is building on a granny flat an option for where they currently are?
 
Peanuts20 said:
Also, is the daughter an only child and is there a risk of family, in effect, being written out of any potential inheritance?.

Is building on a granny flat an option for where they currently are?
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The daughter is an only child, so no issue there. My sister has considered extending her current home but she doesn't like the area anymore, she wants to re-locate to a completely new area (within Dublin).
Peanuts20 said:
If her name is not on the deeds and she is not an owner of the new house, then in effect she is handing over €800k in cash to her daughter. That almost certainly has tax implications
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Could my sister be named on the deeds if she is investing 800K in the new house? Can the three of them be on the deeds?
 
Sherri said:
Could my sister be named on the deeds if she is investing 800K in the new house? Can the three of them be on the deeds?
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Then she may run into issues with the bank. If she's on the deeds, they may want her on the mortgage...but she won't qualify for a mortgage because of her age. And if she is on the mortgage, she is jointly and severally liable for the whole debt.

The bank won't like her having a life interest in the property. That would mean the bank couldn't repossess the property if her daughter stopped her repayments.

You need to talk to a mortgage broker about what way to put it to the bank. A tax advisor re CAT and a solicitor.

The cleanest way to do it is sell the house, gift the proceeds to the daughter. She pays her CAT on it. She will have to pay CAT at some point and if it's in the future, it's likely she will pay a higher amount. I don't think she would get the dwelling exemption on a property she is paying a mortgage on (I could be wrong though). I don't know if they could put a lifetime agreement on a mortgaged property afterwards. The terms of the mortgage may forbid it.

There is nothing straightforward about this.
 
Steven Barrett said:
she won't qualify for a mortgage because of her age.
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If a 40 year old and an 80 year old apply for a mortgage, do they refuse it because one of the borrowers is 80 even if the repayment capacity is based on the income of the 40 year old? Wouldn't make any sense to me, but a lot of banking practices don't make any sense to me.
 
Well I can't speak for present banking practice although from my reading of some of the dedicated online forums it seems to me that we are hurtling back to pre 2008 lending practices at a fast pace! Equity released on PDH to buy property abroad seem to be available again even!

Definitely back then anyway there would be no problem with an older person on the mortgage provided the income earners were younger and fit the age profile for the term. Equally having a parent like that with a right of residence in the house was not a huge issue either, mortgages like that were often done. The person with the RoR had to sign a waiver or whatever the legal term for it was to waive their right in favour of the lender should the need arise, i.e. repossession. That person would not necessarily even have been on the deeds although in this case when they are providing such a large percentage of the funds it would make sense. Many times the parent would not be providing anything like that sort of equity so would not always be a need to have them on the deeds.

The lender would not allow a person on the deeds who is not on the mortgage, the reverse works fine as in on the mortgage but not on the deeds as that doesn't affect the bank's security.

I have seen a few posts lately on the discussion pages where parent/child have got a mortgage so it's definitely becoming possible again somewhere!
 
I bought my house with a somewhat similar arrangement over 20 years ago with my mother and my ex. 90% mortgage with my mother putting up the deposit, all names on the mortgage. Held 50-50 tenancy in common: 50% my mother's, 50% between myself and my ex as joint tenants. No other contracts/agreements relating to the property.

My ex became my ex and i bought out her equity. My mother later died and my siblings very generously disclaimed their entitlement to a share of my home.

So at least one lender has done this at least once.

Your sister would be insane to not have her name on the deeds, and a formal share as tenant in common would be strongly recommended.

Sure there are risks attached to this approach, but there's also risks attached to your mother living alone in old age.

Sherri said:
They want to sell this property and move to a bigger house where they will have more space/privacy/bigger garden etc. My sister is willing to sell her home (worth approx. 800K) and put this value towards the new house.
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Key question is who wants to do what? If your sister wants it (ie she's enthusiastic about it or is the driving force behind the idea) she should go for it. If on the other hand it's something she's simply willing to consent to then that's a whole other scenario and I would say no.
 
Brendan Burgess said:
If a 40 year old and an 80 year old apply for a mortgage, do they refuse it because one of the borrowers is 80 even if the repayment capacity is based on the income of the 40 year old? Wouldn't make any sense to me, but a lot of banking practices don't make any sense to me.
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I don't know Brendan. I send all my mortgage cases to a broker. It's stuff like this that you need an experienced head!!
 
BIG-notorious said:
Sure there are risks attached to this approach, but there's also risks attached to your mother living alone in old age.
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This is a very good point.

But if your mother is a healthy 68 year old, living on her own would not seem to be risky.



Sherri said:
she doesn't want to live on her own. She likes the idea of having her daughter and her family living with her
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It's not because of the risk. She just likes her daughter to be close by. Depending on how strong this is, it might be worth it, but she must be aware that she will be caught up badly in any dispute between her daughter. And I suspect the proximity of the MIL probably increases the chances of such disputes.
 
Is the mother 100% happy to move to a different part of Dublin? Will she lose her support structures like community, activities, GP, pharmacist etc? How will the younger couple settle in to the new target location, what if they are not happy or schools or commutes don't work for them? Who is choosing this new location or are they just looking for a larger property and will move to the location their budget will allow?
 
misemoi said:
Is the mother 100% happy to move to a different part of Dublin? Will she lose her support structures like community, activities, GP, pharmacist etc? How will the younger couple settle in to the new target location, what if they are not happy or schools or commutes don't work for them? Who is choosing this new location or are they just looking for a larger property and will move to the location their budget will allow?
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It's a joint decision. My sister would be nearer other family members in the new location, so the move would suit her. Her daughter and son-in-law also want to move to this location - it would also suit them for a number of reasons.
 
So lets assume the daughter and husband get a mortgage for €500k. If a gift of €800k is made by a mother to her daughter the the CAT bill could be north of €130k. You're probably looking at legal and estate agents bills as well to buy/self and put the required legal agreements in place to cover the mother of €20k+. So how do they plan to cover costs to do this of what could be €150k+.
 
A gift should be completely out of the question.

A loan secured on the property would be the best option.

Joint purchase, where she owns 800/1300ths of it and they own 250/1300s each would be the next option.
 
Sherri said:
My sister would ask for a provision to live in the property until she dies. The house would then be fully owned by her daughter and son-in-law.
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OK. I’m not certain if this was covered in a previous post in AAM or elsewhere, but I’ve come across it. What happens if the daughter predeceases her mother? The mother has a right to live in the property until she dies, i.e. with the SIL (who now owns the house). Would she, a presumably an older lady, be happy with this? Then what happens of the SIL remarries? The MIL is living in a house with two strangers.
 
I've said before that this scenario always strikes the fear of god in me and the older I get the more afraid I get.

I've seen it twice where this has happened, all moved in together, marriage breaks up, in this case the son in law wants his cut of the property and all has to be sold and everyone has to start over again. Very stressful.

also if the mothers name is on the deeds/loan, what happens the house in the situation where fair deal is required if she has to go into a nursing home.

Would they not just buy two houses beside each other?
 
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