General help and advice required regarding a house purcase to let to a family member

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    General help and advice required regarding a house purcase to let to a family member

    Hi there,

    I have no knowledge of the rental market or buying a second house, so any advice on the following situation is much appreciated. My mother is selling her house for 150k. My brother currently lives there (no one else) and doesn't pay rent (there is no mortgage) and he just pays the bills. Mother lives with her new husband elsewhere.

    He doesn't want to move as he's lived there all his life, and earns about £12k a year working in a factory. He also has some learning disabilities. She plans to sell the house and then buy my brother a flat for about 70kish and then keep the rest herself.

    Basically I would like to buy the house myself and could maybe afford £80k but would need to borrow 60k (so my mum would get roughly the same amount if she was to sell for 150k and then get my brother a flat). I currently have a mortgage on my own house, so suppose this would be a 2nd home.

    I would need to charge my brother some rent - does anyone know the rules around renting to a family member? He currently receives working tax credits, but I don't know if he would be eligible for housing benefit/ universal credit or how the system works. The house is 2 beds.

    Also is there anyway I could make this a viable investment option for myself. I want to keep my brother where he is happy and stable, but I'm also concerned that I may just be losing money myself to pay to keep him there so wonder if there is a way to make this an investment option for myself as well.

    Also if my brother refused to move, does he have any rights to stay there, or could she just kick him out? He has paid for a new bathroom, new kitchen and has refurbed the place (all before we knew she would sell it as she previously said she wouldn't sell it).

    Thank you,
    S

    #2
    Money matters and family never go turn out well, no matter how good the intentions are.

    Comment


      #3
      Originally posted by Gizmo101 View Post
      I would need to charge my brother some rent - does anyone know the rules around renting to a family member? He currently receives working tax credits, but I don't know if he would be eligible for housing benefit/ universal credit or how the system works.
      Yes I know the rules, and you have very little chance of that.
      The DWP would see that as a contrived tenancy; ie. not a real tenancy and just done with a view to claiming benefits.
      (That is benefit fraud).

      And to be frank you admit that that is your intention:

      Originally posted by Gizmo101 View Post
      Also is there anyway I could make this a viable investment option for myself.
      Why do you think that the public purse should fund your investment?

      Your mothers thinking of buying a flat outright and gifting it to him is a much more sensible suggestion for him, and as an all round solution.

      But of course that doesn't make any profit for you.

      Ask yourself if you would be even considering buying another property if you didn't think you could get the benefits system to pay for it.

      Comment


        #4
        Mortgage companies usually specify that you can't rent to family so your plan may fall at the first hurdle.

        Your intention. of keeping your brother somewhere he is happy is laudable but in reality might result in him being overhoused and then reliant on benefits. Your mother buying him a flat is a much more secure option as his housing costs are then taken care of.

        Perhaps your efforts would be better used helping to choose a flat your brother will be happy in and helping him to settle.

        The work he has done on the property will be reflected in the sale price so should benefit both your brother & mother in the end.

        Good luck

        Comment


          #5
          This doesn't sound like a good idea to me. You will have to pay the additional 3% stamp duty, you don't know anything about being a landlord and its a minefield in which you could lose a lot of money, you may struggle to persuade DWP to grant your brother UC to cover the rent, but worst of all, its very likely to lead to irreparable rifts in the family. I would advise against it.

          Comment


            #6
            I can only agree with the comments from all the above, it will work out badly for you, let your mother sell her house and do what she wants with her money, your brother clearly needs assistance into the future and making him secure in his home is by far the biggest advantage any parent can give, adopting your mothers plan will mean he lives rent free into the future (other than the usual utilities), going down your plan would mean he pays rent for life...... i doubt the taxpayer will pick up the monthly amount, even if the rent is paid by the rest of us initially it does not mean it will in the future, then he is in real trouble. Let this idea go, your mother is on the right track.

            Comment


              #7
              You won't be able to get a mortgage without committing fraud, so it's a pointless idea.
              BTL mortgages won't allow family lets.
              Residential mortgages don't allow letting and consent to let won't allow family letting.
              Specialist family BTL products exist, but you won't pass the criteria.

              It would cost you £5,000 in SDLT.

              Your brother would not be eligible for housing benefits.

              You end up with the £70,000 in equity this route rather than it being spent on your brother, which is its only plus point.

              Your better route would be to sort out with your mother why she's prepared to give your brother £70k and you nothing.
              It might be more sensible for your mother to "give" you both the flat, which your brother would actually live in, so that you don't lose out.
              When I post, I am expressing an opinion - feel free to disagree, I have been wrong before.
              Please don't act on my suggestions without checking with a grown-up (ideally some kind of expert).

              Comment


                #8
                Thanks everyone, these are very helpful comments. My intention is not to commit fraud. My brother receives working tax credit so may not need housing benefits. I may in fact be able to pay the mortgage myself for him which is another option as he really doesn't want to move and he is happy there.

                Does anyone know what the rules around getting a mortgage for a second home with a family member living at the property rent free?

                Comment


                  #9
                  Originally posted by Gizmo101 View Post
                  Does anyone know what the rules around getting a mortgage for a second home with a family member living at the property rent free?
                  I'd say it would be virtually impossible.

                  I can't be 100% certain, and you should probably try a couple of brokers (or ask in here - https://forums.landlordzone.co.uk/fo...ment-questions).
                  But I think it's probably not achievable.
                  When I post, I am expressing an opinion - feel free to disagree, I have been wrong before.
                  Please don't act on my suggestions without checking with a grown-up (ideally some kind of expert).

                  Comment


                    #10
                    You could remortgage your own home to release equity.
                    When I post, I am expressing an opinion - feel free to disagree, I have been wrong before.
                    Please don't act on my suggestions without checking with a grown-up (ideally some kind of expert).

                    Comment


                      #11
                      BTW, bear in mind that if your mum does gift your brother a flat and she does not live longer than 7 years after the date she gives it to him, it could become a so-called Chargeable Asset and liable to inheritance tax if your mother's total estate is worth more than the threshold for inheritance tax (currently just over £300K). In any case, it would be a good idea to make sure your brother has a formal record of the gift being given (amount, date, etc) so that he can prove when he was gifted it and, if she dies after the 7 years, prove it's a so-called Potentially Exempt Transfer.

                      Comment


                        #12
                        Originally posted by tatemono View Post
                        BTW, bear in mind that if your mum does gift your brother a flat and she does not live longer than 7 years after the date she gives it to him, it could become a so-called Chargeable Asset and liable to inheritance tax if your mother's total estate is worth more than the threshold for inheritance tax (currently just over £300K). In any case, it would be a good idea to make sure your brother has a formal record of the gift being given (amount, date, etc) so that he can prove when he was gifted it and, if she dies after the 7 years, prove it's a so-called Potentially Exempt Transfer.
                        Thanks, wasn't aware. Do you know if this applies if she's only going to give him some of the money towards a flat, say 50k?

                        Comment


                          #13
                          Originally posted by Gizmo101 View Post

                          Thanks, wasn't aware. Do you know if this applies if she's only going to give him some of the money towards a flat, say 50k?
                          Almost anything given is subject to inheritance tax if giver dies within 7 years.
                          Look at HMRC web site for details.

                          Comment


                            #14
                            As MdeB . Here's a starting point: https://www.gov.uk/inheritance-tax/gifts

                            Comment

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