Family member buying you a house?

Suppose a family member in the UK helps us buy a house in the UK (and essentially becomes our landlord).

Other than the one-off "stamp duty" of over 8K (it would be their second home), are there any holes in this plan that we need to be wary of? 

We would be paying the mortgage and all associated costs through them.

(Be honest, I'm used to none of my "ideas" working out.)

Warning:  I tend to think that money and family/friends don't mix well, so take my 2p with a grain of salt.

I would ensure YOU have a legal contract with the family member that YOU are allowed to make improvements, etc.  Also, how a sale will be treated.  I suspect you would want to get any equity that is earned in the home, but under the agreement you are proposing (being a tenant), you would not be entitled to that.

I would also be concerned that if you were audited at any point, it could look like you are trying to dodge taxes.  Remember the family member will need to pay tax on the income for the property, depending on their tax bracket, this could be 45% of your rent payment.

Also as the mortgage would be a Buy To Let mortgage (which is what you have when you are a landlord), you would not be paying off the balance due on the home.  These are interest only loans.  They have an entirely different qualifying calculation than a traditional mortgage.

Also as the mortgage would be a Buy To Let mortgage (which is what you have when you are a landlord), you would not be paying off the balance due on the home.  These are interest only loans. 

Not always... it's the borrower's choice. 
But the vast majority do choose I/O.

Borrowing money (or permutations of the same) or loaning money to family or friends.... That can turn out very badly. I think I'd not do what you are proposing unless you had a lawyer involved who could make sure your interests were represented legally.  Otherwise I can see handing over a lot of rent and then being asked to leave, down the road, for any of a number of reasons. It would be an ugly scene.

I know KFD is a landlord also so not sure if she’s had this as well, but when we took out our BTL mortgage, it stipulated we could NOT rent to family members.


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Scrapped this idea back in January anyway. 

Scrapped this idea back in January anyway. 

Ahh you hadn't really said so thought I would just mention in case this was still a potential idea. Just didn't want to see you guys potentially screwing yourselves over without realising

Ahh you hadn't really said so thought I would just mention in case this was still a potential idea. Just didn't want to see you guys potentially screwing yourselves over without realising

Thanks, just very used to every "clever" idea I think up for moving back with the least amount of risk die on its ar$e 

Suppose a family member in the UK helps us buy a house in the UK (and essentially becomes our landlord).

Other than the one-off "stamp duty" of over 8K (it would be their second home), are there any holes in this plan that we need to be wary of?

Just in case this idea is back on again.

They would have to comply with all the laws for landlords, including the gas safety check within every 12 months, ensuring your safety, repairs etc and pay taxes on their business.

They are liable for the mortgage repayments even if you can't pay it. What about when the interest rate rises to 10%, can you pay it? The historic average in the UK is about 7%/8% interest rate but has been as high as 15%.

If ever you needed benefits like Housing Benefit, renting from a relative can mean you might not get that benefit.

If ever they needed means tested benefits, they would not get them because they have  over 16k captial in the house they own that they don't live in.

If they are already claiming the benefit called Tax Credits, they would lose that benefit when they are moved onto the new replacement benefit called Universal Credit because of the new capital rule: capital in a property that they don't live in, in any country.