Buying a house from my in laws. Advice please

Discussion in 'Finance, Property, Law' started by floppyjocky, Feb 9, 2006.

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  1. Hi there.

    I am about to buy my Mother In Laws house. It is worth about £160k and all I have to pay is the outstanding mortgage, approx £35k. I'm off the housing market at the moment but have owned before. Is there a way to do this without attracting a monumental amount of fees? She recently had a valuation survey. the house is not on the open market as this is being done purely to avoid future inheritance issues. My Mum in law will be staying in the house mortgage/rent free for however long she wants to (or until she passes away).

    Also, probably a question for the RHQ forum. I am over 37 and have never used the assisted house purchase thingy before. As I have owned a house before will I still be entitled to the assistance? Last question, does anyone know if I am entitled to be reimbursed any legal fees.

    Basically I'm trying to avoid paying out to loads of leeches when in all my Mum in law wants is to give us her house.

    Any ideas
  2. You will have to pay soliciter's fees, as it's a transfer of property and you'll need your name to go on the deeds.

    You won't pay anything else because an estate agent is not involved and you're under the threshold for stamp duty.

    Can't help on the assistance money problem.

    Hope that helps,

  3. you should make sure that you all understand the precise details of legal and equitable ownership, and of the terms on which your mother in law occupies the house. Who says when that ocupancy terminates, M-I-L or you? That is, does she have a legal right to occupy, or is she operating under a bare licence? If, God forbid, you and your spouse/partner separate, what happens to ownership of the property/right to occupy? It may be worth your while speaking to a leech now, on the principle that it is better to donate a small amount of blood prophylactically now rather than an armful during firefighting measures later.
  4. Be careful if she is going to stay in the property. There is something called 'Reservation of Benefit' which basically means that sh'e given you the property, but not really. The Taxman doesn't like it and can ignore the transfer for IHT purposes.

    There are ways around this, but it's worth getting proper advice. Yes, it will cost but better a few fees now than a lot later.


    Edited to say: Just read Schweik's post, all good points.
  5. Passing bells is right.

    If you are mortgaging the property then a valuation will have to be done and you may have to declare the gifted equity.

    The inland revenue get a copy of the transfer deed etc and if there is a rat smelled then you may be investigated.

    If the house is valued below the Stamp duty threshold or in what is considered a disadvantaged area then No Stamp is payable. This is found on the Inland Revenue website.

    At £16000: £1600 stamp duty will be payable.

    By rights your mortgage should be a let to by if you aren't going to reside there, and if your M-I-L is considering claiming housing benefit etc, she may have to explain where the equity in her property has gone.
  6. There are a couple of very good books in the local libraries telling you how to do the whole thing yourself, xmt the solicitors bit, which should be cheaper than normal as they dont have much to do.
    Stamp duty is a real bugger but then I know people who have agreed to buy houses below the market value and have sat and watched 'the green stuff' change hands afterwards. Saved her ex-husband (wife beating b*****d) getting £25K so it was worth it
  7. An additional point - I was listening to a programme on Radio 4 last week (Fri 3 Feb) and this came up as a result of discussion about inheritance tax. The bottom line is that the tax man will find out and if your m-i-l stays resident and ownership is transferred to you, she will need to pay rent at the full market value. You may think that you can just get around that by saying she pays rent - but you will be taxed on the market value as income.

    Get proper advice before you commit yourself to anything.
  8. Thanks for the great response, lots of good stuff to keep me going.

    Just to add a few more details in case it helps. The M-I-L won't be claiming any benefits as she is still in full time employment and expects to carry on until 70 (she is 60 now). I am in my last 3 years and it may be that for my last 2 years the wife will move in with M-I-L and I will get a flat near work (through MoD as no mess accn near by) I will then start looking for another property for us (dependant on where i get employment) , technically I would hope that this would mean that I own and live in the property and the M-I-L just happens to live with us. We have no intention of trying to buck any systems like benefits/council tax etc I want it all to be above board.

    I will of course be seeking advice from the paid experts but I've seen an awful lot of good stuff on this board in the past and just getting a feel for things.

    Thanks again.
  9. BiscuitsAB

    BiscuitsAB LE Moderator

    Be carefull about how you do this. With you not living at the address and your mil not paying rent, she is def. looking at a GROB (Gift with Reservation of Benefit) and if her estate exceeds the nil Rate band for IHT then the seven year rule applies and there will be a tax liability. If you buy the house from her for the price of the outstanding mortgage and dont live there YOU stand the risk of a Capital Gains Tax charge on the proceeds of the sale and the Gain will be calculated on everything above the level you borrow for the mortgage.

    my advice is get some advice dont try and do this yourself. You need a solicitor and a good financial planner who is up on tax law.
  10. Ok, understood. I think that if I move my family into the house with M-I-L then I should be OK. The only reason i wouldn't be paying for accn is because I would be on the over 37 package which I think allows me to have a house elsewhere in prep for leaving the army. So when i buy the house i will be effectively living in it (albeit commuting home at weekends) it's over 200 miles from my duty station. Then in 2 years or so I will probably buy a second property and sort out rental etc.

    I won't be doing it myself, just getting a heads up on all the aspects to think about before me and M-I-L meet the solicitor later this month (didn't want too many nasty surprises).

    Thanks again everyone.