Buying a house short term....let me explain

Hi, thanks for all your thoughts.

Lots of things to think about. To address a few questions my step-d husband took his own life (tragically) so no entitlement for mortgage to be paid off.

I think she would rather sell her own home than rent it out. It holds a lot of bad memories and i think she'd rather be 'well rid' of it.

The new house value is approx £110,000 so not sure where we stand on stamp duty for a 2nd property. DH is 58 and retired on a company pension and i am 48 and in full time employment.

We aren't in a position to buy her home as its value is over 200,000k though there is some equity it in. It was a new build for first time buyers so she/they had some government scheme to assist with the mortgage i think.

We did discuss renting another property for her but it would mean moving all 3 of them (the children are toddlers)and then moving again when the house sells which she isn't keen on either. Also, most houses have a 6 month minimum let and if her house did sell when she'd just moved into rented property, we'd still have months of rent to pay.

If she loses her job then the plan would be (i think) that she would be able to claim housing benefit which would cover the mortgage.

Regardless, we are in a position where, fortunately we could cover the mortgage regardless of the time it takes to sell the house.

Any more thoughts or input greatfully received

Just a point, bytheway, say you rented a property for the family on a six month let.

It would take at least 3-4 months from the date of an offer being accepted on SD's previous house to a completion date and there's no guarantee that offer wouldn't fall through. You'd probably be safer with a 12 month let.

bytheway sorry to read about the tragic circumstances in which your stepdaughter's husband died.

Just another point - if her house was bought on a shared ownership or similar basis, selling it might not be straight forward and/or there may not be as much equity in it as she thinks there is.

I can't help but wonder - has this in part got to do with the fact that she has her heart set on buying this particular house and her father (or you too) wanting to in some way compensate for what the family has been through?

I think this is a disaster waiting to happen. Do nothing until you have run it past a solicitor. You could end up being responsible for paying for two properties. Can you really afford that? Is it not possible to work out a solution in your own home or for her to lower the price for a quick sale? I am a great believer in people being responsible for their own debts. Good luck with it anyway. I suppose it comes down to how reliable and trustworthy you think she is. Tying yourself into a monetary situation with family members is usually a recipe for disaster in my view.

could you get a buy to let mortgage on the new house,that way she wouldn't need to pay the rent until she can afford to and as long as you make the mortgage payments it should be fine,then as long as its 6 months from date of purchase you can resell it to her ,check with a mortgage broker for details ,but that would mean just one move for them so the children wouldn't have to move again

Devorgilla,we've bought several flats/houses for our kids over the years with no issues,as lobng as they pay rent until they can get back on their feetits not a problem and the money will be going to them when we're dead.

Just a point about housing benefit - I think you will find it is only available for rent and not mortgage payments. After 3 or 6 months - not sure which - they pay just the interest on the mortgage. If the house was yours and she was renting it from you she would get nothing - you are expected to help out - same if they live with you. She might be better renting for a while and see how things go - although rent is often more than a mortgage cost.

bytheway the deposit on a buy to let would be around 25% so you wouldn't be tying up all your cash and if she decided she preffered another house you can either rent to someone else,giving you an income or resell it

Can you claim housing benefit to cover a mortgage on your own house? I didn't think that was allowed, but am prepared to be corrected on this!

Oh I see Welshwife has just raised this point, while I was deliberating....

bytheway there are really good cheap mortgage rates available on buy to let ,so the outlay on the monthly payments wouldn't be massive and would give her the chance to get some independence while being close to family,even if you pay the mortgage payments at first and she pays you back once she sorts herself out .My heart goes out to her,she must be in a terrible state of mind ,my neighbours daughter committed suicide leaving two over five kids and a baby ( she had severe post natal depression) her husband struggled for a long time ,

In the recent past I have rented a cottage to my DC who claimed Housing Benefit. It was all fine with the DWP, as it was not my home. You would need to check the current rules, though.
I suspect that owning her current house might disqualify her from Housing Benefit, although she should get Jobseekers A!lowance for at least 6 months, if she lost her job.

If it were me, I'd consult a mortgage advisor to find out the likely costs of your husband's plan, and also of doing things as buy-to-let. If you both feel you can afford the extra costs to you, then go ahead.

Also suggest to your stepdaughter to reduce her house's asking price to get rid quicker.

This is a very distressing situation for everyone and I hope there is some stability for you all, very soon.

Ana, Most people have life insurance as part of their mortgage, I think some lenders insist on it, so when this unfortunate lady's husband died, the mortgage would have been paid off, so she would now own the house outright with no mortgage payments to make.

Having said that, I,too, would think it would be better to pay for her to rent a house locally rather than buy one for her. I know this means she may lose the house she has found and likes, which is difficult in the situation she is in, but better that than her parents mortgaging their financial future on her house moves.

I had just posted the above post when an idea occurred to me.

If the parents want to help her get the house she really wants, instead of buying it for her they should LEND her the money so she can make the purchase, with the loan secured on the house that is being sold. That way there are only one set of solicitor's expenses, stamp duty etc and they know that when the previous house is sold, and all houses sell eventually, their capital will be returned to them directly by the solicitor on the day the sale goes through. All it will cost them is the interest lost during the loan period, assuming the loan is interest free.

It is by far the simplest solution.

Organise the loan through the solicitor, no informal undocumented family agreements because you love and trust each other, these usually go disastrously wrong.

To protect yourselves you must have something in writing which lays out exactly what the understanding is between all parties.
Of course the other alternative is that you buy the house and she rents it from you - but again have a contract and take out landlords insurance ...its great that you are willing to help her and your GC in very difficult circumstances

Rent somewhere for 6 months. This will not leave you with any tax implications and may well be only the same as stamp duty on a purchase.

The road to hell is paved with good intentions, I know I am a frequent traveller.

MOnica, no insurance cover as OP said her stepdaughter's husband very sadly took his own life.

M0nica, the OP said the SD 'is mortgaged to the hilt and cannot afford any further rent or mortgage at the moment'.

Also, not all insurance policies will pay out in the circumstances of her husband's death.

x posts Solitaire

Lots of new home builders are offering to buy your house from you if you purchase new from them - is there such a scheme where you are living? I have moved from Dover Kent to Telford Shropshire and have spent a year getting a buyer for my house in Dover so two months is no time at all. We had to rent here because we needed the equity from my house to purchase again - it's dead money as you get nothing back for your investment if you are renting. Do you have a large garden? If so you may be able to purchase something along the lines of a Tiny Home (subject to planning) or a residential caravan that your step-daughter could live in whilst living with you - when she finally moves into her own home you could either sell this on again or look into doing B&B or holiday lets (if you are somewhere where there is a demand for this).

Two possible solutions come to mind which wouldn't involve you in any financial dealings.

There are companies (and the names escape me for now) who guarantee to buy your home - like webuyanycar.com, but for houses - although it is less than market value, but you are guaranteed a sale and they pay the expenses. That might be worth considering just to get things moving and take away all the worry.

Second - has she considered a new build property? There are some developers who will take your existing home as "part exchange" for a new house. Again, I suspect it will be at less than top market value, but takes away the uncertainty.

The scheme you propose has many problems. If the value of the house goes down by the time SD is ready to buy it, will she still pay the cost price? If the price goes up, there can be problems selling it below market value as the tax man thinks you are trying to avoid Capital Gains Tax. In any case, you are going to lose out if she only pays back the money you paid for the house. As well as the purchase costs, there's the cost of the mortgage. Can you afford to lose this money? Does SD actually want to give up her old life and home permanently? What about her children? You don't say how old they are, but do they miss their old friends, the familiarity of the house which holds so many memories of their Dad? Maybe the best thing you can do for her is encourage her to go home and take up her old job, until she can think clearly about what's best for her and her children's future. This isn't the right time to do that, so close to her husband's death.

Farnorth your post really surprised me.
A few years ago DD1 was going through a bad time. Mum and I discussed buying a flat for her and the DGCs but were told in no uncertain terms that DD would not get HB as that would be to the advantage of family members. I thought that was perfectly reasonable.
I know of a family claiming HB on a flat owned by his sister. The sister transferred ownership to her partner thus avoiding the fact that flat was owned by a family member. They married recently so I don't know the current situation.

What no one has mentioned is that if this person buys this second house, then there will be considerable Capital Gains Tax payable on the second house, whenever it is sold. One can only have ONE residence without Capital Gains Tax on a second, or subsequent property. Do take specialist financial advice!

There are a number of problems here, most of them legal.

A solution is possible but you need to be fully protected in the event of some change in any of your circumstances. The better option I believe would be for you to offer a mortgage so she can purchase the new property in her own name.

At the same time you should take a second mortgage on the property to be sold to ensure you get your money back. You must have clear advice on the possibility of a sale and the asking price so that you can be reasonably sure a sale can be achieved. Do not overlook all the costs involved.