Hi folks - I wonder if I could run a quick scenario past you all for some advice.

My mother has a 'one account' type mortgage, and she has about 4 years left until retirement. She owes around £45K, which she will not repay in full before she retires. Her property is worth around £215K, and as things currently stand she will need to sell the property to pay off her mortgage. We are keen to avoid this, as we really want my mother to continue to live near us in her retirement (if she did sell up, she would probably move to a holiday home we have, which is several hundred miles away).

My wife and I currently live in a rented property on a private estate (we are happy here, and have no intention of buying a property to live in in the near future, although we are considering investment property).

What we would like to do is buy my mum out. We would pay off her mortgage, and then let her live there rent free. We would essentially be paying around £90K (giving her some extra capital) for a property worth £215K + We would need to arrange a mortgage for this, so my first question is, would this be a BTL mortgage, and if so how would we get around the 'rent free business.' (We may be able to charge her rent (I would think about £200 pm) for the next 3-4 years, but definitely wouldn't want her to pay anything once she retires).

If not BTL, how could we arrange a mortgage for this? Also, what are the tax, cgt and IHT implications of this scenario?

Any advice gratefully received. Thanks :)

HI....you can but the property undervalue using only Halifax and Bank of Scotland, unlimited family gifted deposit facility. This will require no deposit and the loan will be seen as a 42% loan to value deal. You may want to consider other family members if they were to benefit from an inheritance. Your mother can remain there on a standard residential mortgage even though you do not. Capital gains will not be payable if it is your only residence, tax would be payable on any income declared. Inheritance tax is only payable if the total estate is over the 300K limit and your mum dies within 7 years of the gift. I know about mortgages but the other side I have given my opinion based on my understanding of the situation. Perhaps CMK could either agree or put me in my place ??? :)

---

Regards

Ian

Thanks for the reply - much appreciated :)

I am an only child, so fortunately inheritance issues aren't complicated! Will go look at HBOS - if anyone else can confirm the tax implications then please do.

Thanks

Ian - Capital gains will not be payable if it is your only residence, Income tax would be payable on any income declared. Inheritance tax is only payable if the total estate is over the 312K limit and your mum dies within 7 years of the gift.

Hi Ian has pretty much summed it up with the quote above regarding tax implications, what simplifies this further is the fact that your Mum's estate is not large enough to fall into Inheritance tax considerations.