Buying a second home for sibling to live in, mortgage issues?

P

paddytheape

Registered User
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31
Hi All,
I own my own house (with 50k mortgage outstanding, house value 130k, 10 year term, only 6 months in) and have an ill sister who desperately needs a place to live. I can afford a second small mortgage which could buy a small house in a country town where my elderly parents live, so I will own the house, pay the full 125k mortgage over a 25-30 year term and earn no rent from my sister, she can stay there for as longs as needs, forever if needs be! This would effectively be a holiday home for me, minded/occupied by my sister.
Is this as simple as it sounds, the re-payments or financials are not an issue here, just wondering how best to approach the bank for this mortgage, I want to be fully upfront and tax compliant.
 
I would charge her rent of €1. Have a lease. Discuss with a solicitor. Also can you afford two mortgages, have you a deposit? Not sure if your sister could be taxed on notional free rent, sounds very messy. Is she putting pressure on you? Where is she living now. Forever is a very long time.
 
What age are you? What if your circumstances change and then you are in trouble with the other mortgage? Say you lose your job, have children, get some illness/injury preventing you from working? It may not be in your sister's interests long term to have you entirely supporting her housing need.
Maybe there are other solutions for you to support your sister without having to actually go into debt for 125k now and for the next 30yrs. I know your sister and her health are of the utmost importance to you, however in order for you to continue to support her long term, you also need to look after your own interests and keep your own situation as stress free and future proof as you can. It is a very emotionally draining situation regardless of your financial assistance. She may also prefer not to be beholden to you. Would you really consider it a holiday home or is that a convenient way to frame it. If you are supporting someone who is sick, and supporting your parents, you may need holidays away from the situation speaking from experience.
Other suggestions:
Help your sister find a nice rental in the town near your parents, assist her to apply for rent allowance etc. You can stay there too on visits.
Extend/convert your parents home to create accommodation for your sister so she can have her own sitting room, front door. You might be able to do that for 30k perhaps.
 
you have 2 issues here, one short term, one long term

the short term issue is simple, can you get the mortgage and in effect set yourself up as a landlord?. Without knowing the full situation, it's difficult for anyone on here to say yes or no to that. Bear in mind that in addition to the mortgage, you also need to sort out who pays utilities, property tax and all other bills

Longer term, you need to think what happens if you or your sister's circumstances change, in particular if illness or partners (current or future) get involved
 
Can your sister get rent supplement? Are there properties to rent in this town?

Alternatively if you do decide to buy somewhere can your sister get rent supplement and pay you rent?
 
Great replies guys, thanks very much:
me: 41 years,single, public service salary 57K in a job I love, mortgage remaining on my own small house 50k (600/month all in, 9.5 years remaining) plus have a spare room I could rent (E400+) so regarding my own house, financially I have no worries and plan to pay it off sooner than the remaining term.

Sister's possibility to rent: No rental whatsover available in town, sister used to live in Dublin but I had to contribute most of her rent and this was no longer viable so she had to move back in with parents, she's 43 and diagnosed with a mental illness (that has cost her a great career and life) 15 years back and we have been in a vicious circle ever since. With a stable home environment, she may prosper! She could and is entitled to get rent allowance but if I owned the house, I don't think legally I could accept it, anyone clarify this for me? also, I don't know what to say to the Bank in asking for a second mortgage as it's not a 'buy to let', I just need (and can afford) to buy a 100-130k house.

As my dad is also very ill at 80 years, my mum will need to downsize from a nice 300k house and could feasibly live in this new house with my sister and maybe buy me out outright, (my dad was given 2 years a while back but has rebounded, I expect 2 more years max) ultimately that too is my goal, that both my mum and sister would share this house, at least while the family home is sold and then, my mam aged 70 will have options and spare cash.

I really appreciate your comments, I'm trying not to involve my other siblings as they have enough on their plate with the usual renting, childminding, no deposits etc. how anyone lives and works in Dublin with kids is just beyond me!
 
I don't think you are correct about you not being allowed have rent from her from social welfare. As long as it's a legitimite landlord business. And I think that is a much better way to go. You need to look into this. Also you can leave the house to her in your will, if she's not able to take care of herself then it can be left to yiour parents with a right of residence to her. You need to talk to a solicitor about the best options.

Also maybe you need to rethink this. Why can't your sister stay with her parents for now and continue on when your father passes away? If it's too large your mother could downsize later.

As you've other siblings, be careful that eveybody knows what decisions are made so that nobody gives out later and says they weren't told. It will happen to you so you are warned.
 
Bronte said:
Also maybe you need to rethink this. Why can't your sister stay with her parents for now and continue on when your father passes away? If it's too large your mother could downsize later.
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been raised before and to me appears the most appropriate option. OP you appear to be seeking a 100% mortgage on a 2nd property. Perhaps I'm wrong but if not then it's not a runner. It will be classified as a BTL property and from my own experience in the current lending environment would not be a lending option.
As per Bronte's post I recall a relative telling me that SW have no issue with granting rental allowance in the circumstances as outlined provided it meets all of the other criteria. However you should progress no further until you establish your ability to borrow.
 
Thanks Bronte, she's currently living with my folks and doing a great job in helping out my mam and dad, my dad is bed bound now, but it's a very stressfull environment and she needs to get out if she's ever to have any chance of mentally getting well. Yes I will arrange to meet my solicitor asap.
My folks house is an old and very cold three storey, that's not suitable now for any of them really but they will downsize ehen my dad passes on and this potential house purchase could accommodate both my mam and my sister during this period.
 
I think Paddy you really need to step back from this and think about it for a while. I'm very glad you've at least discussed it on here, and that you are now going to talk to your solicitor. You need someone with a cool head to guide you.
 
Thanks again everyone. I'm hugely impressed and grateful for any and all responses. Pints and chocolate due to you all!
So I met with my bank this morning for a 'buy to let' mortgage. They will offer a max of 75% LTV and base the decision on a case by case situation. Additional to having 25% deposit, I require at least 6 months equivalent rent in a separate account to cover any void periods, a letter from local estate agents documenting likely rental income from 3 similar houses in the area, proof of funds to cover stamp duty and solicitors. With all this in place, I am good for 90k loan (my ppr mortgage has only run for 6 months, thankfully the bank have no time restrictions as to when a second mortgage could be applied for.) They will not provide mortgage for appartments and because the house I am interested in is 'only' worth 100k, they will need to verify that house is in good condition with no improvements required and suitable for renting. I will meet with my solicitor next week and update here for anyone interested (or in a similar situation looking for a BTL mortgage)

Also, just to add, any rental income (share a room scheme) from my own house would not be taken into consideration by the bank as supplemental income as this could stop at any time. Fair enough too I suppose!
 
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