Sale and Rent Back

Posted on 3 August 2011 by david


My ex wife and I are on benefits and can no longer afford the mortgage payments.  We are both 46, the house is worth approximately £240,000 and we owe around £85000.  Can we sell it to our son at £85000, he would then rent it to his mother?

David

There is nothing legally to prevent you selling the property to your son for £85,000, so long as the outstanding mortgage is either repaid in full or transferred to his name. 

If you sell the house and you wife continues to live in it and pay rent, she may not be entitled to housing benefit.  She may also find that the market rent on a property worth £240,000 is higher than the existing mortgage payments.

Your son will have great difficulty in getting a mortgage because of the reduced purchase price and your ex-wife staying in the property.  As far as the lender is concerned there is a danger of her having rights of occupation that pre-date their mortgage and them not being able to get vacant possession should they call in the mortgage debt.

There are other factors you will need to take into account and I recommend that all 3 of you take independent legal advice, as well as speaking to your local Citizens Advice Bureau before taking any further action.

Peter

Answers provided in response to Ask the experts are based on the information provided and do not constitute advice under the Financial Services & Markets Act. They reflect the personal views of the authors and do not necessarily represent the views, positions, strategies or opinions of John Charcol. All comments are made in good faith, and John Charcol will not accept liability for them.

We recommend you seek professional advice with regard to any of these topics where appropriate.

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