Your browser isn't supported
It looks like you're using an old web browser. To get the most out of the site and to ensure guides display correctly, we suggest upgrading your browser now. Download the latest:

Welcome to the MSE Forums

We're home to a fantastic community of MoneySavers but anyone can post. Please exercise caution & report spam, illegal, offensive or libellous posts/messages: click "report" or email forumteam@. Skimlinks & other affiliated links are turned on

Search
  • FIRST POST
    • ent_moot
    • By ent_moot 15th Jun 17, 11:03 PM
    • 14Posts
    • 2Thanks
    ent_moot
    Buying part of parents house
    • #1
    • 15th Jun 17, 11:03 PM
    Buying part of parents house 15th Jun 17 at 11:03 PM
    Hello,

    My parents are going through a really tough time and are near retirement, so I'm thinking of remortgaging my own home to generate ~120k , use this to fully pay off their mortgage, and therefore own about 1/3 of their home.

    Firstly, is my bank likely to allow me to do this? My details:

    Home value: 450k
    My current outstanding mortgage: 158k
    My salary: ~100k (I have a high salary, but am crazy-frugal because I want to retire at 40)


    Secondly, would there be any fees / taxes I would need to pay to do this?

    Also, another option might be for me to leave my mortgage as it is, for them to leave their mortgage as it is, and then for me to pay their mortgage payments via their account. This might even be better, because they have a fantastic mortgage (1.1%). However, could this be problematic because of capital gains tax or something?


    Your advice would be greatly appreciated.
Page 1
    • kidmugsy
    • By kidmugsy 16th Jun 17, 12:49 AM
    • 9,317 Posts
    • 6,109 Thanks
    kidmugsy
    • #2
    • 16th Jun 17, 12:49 AM
    • #2
    • 16th Jun 17, 12:49 AM
    Good for you.

    It's not clear to me why your paying off their mortgage must mean your automatically owning a third of their house. You could arrange it so that you've lent them the money, at 0% interest rate, and that your loan is secured by a charge on the house. That would avoid taxation worries.

    If you want to gift them the monthly mortgage repayment that too would be simple. if you wanted to treat that as a series of monthly loans, or annual loans, I suppose you could secure your money by a charge on the house that increases monthly or annually - you'd have to consult a solicitor about that. But then you (and they) are going to consult solicitors anyway, aren't you?
    • ent_moot
    • By ent_moot 16th Jun 17, 12:25 PM
    • 14 Posts
    • 2 Thanks
    ent_moot
    • #3
    • 16th Jun 17, 12:25 PM
    • #3
    • 16th Jun 17, 12:25 PM
    >>It's not clear to me why your paying off their mortgage must mean your automatically owning a third of their house.

    I thought that if I just "gifted" them the money to pay off their mortgage, it would be subject to capital gains tax. Is this not the case?


    >>You could arrange it so that you've lent them the money, at 0% interest rate, and that your loan is secured by a charge on the house. That would avoid taxation worries.

    Thanks, this sounds like a good solution too. My parents are keen that it is something fair in both directions. Obviously, if I invested the money or bought something else I would likely make interest/rent, so they would be happy to pay some small rent (or interest if you prefer) so that they don't feel they are being a burden.

    >>But then you (and they) are going to consult solicitors anyway, aren't you?

    I would prefer not to - if it can be done legitimately without wasting money on solicitors bills, this would definitely be my preferred option. As far as I can tell, 95% of solicitors do is administration and pulling together information that I could do myself. Of course, if I see evidence that I am taking a serious risk by not involving a solicitor then I might do so. Aside from what might transpire from a family fall-out (which I think very unlikely), can you think of any serious risks in not consulting a solicitor?
    • jimjames
    • By jimjames 16th Jun 17, 12:57 PM
    • 11,817 Posts
    • 10,180 Thanks
    jimjames
    • #4
    • 16th Jun 17, 12:57 PM
    • #4
    • 16th Jun 17, 12:57 PM
    >>It's not clear to me why your paying off their mortgage must mean your automatically owning a third of their house.

    I thought that if I just "gifted" them the money to pay off their mortgage, it would be subject to capital gains tax. Is this not the case?
    Originally posted by ent_moot
    Can you explain what you mean? Who would be liable to CGT and when?
    Remember the saying: if it looks too good to be true it almost certainly is.
    • Aretnap
    • By Aretnap 16th Jun 17, 1:00 PM
    • 2,620 Posts
    • 2,077 Thanks
    Aretnap
    • #5
    • 16th Jun 17, 1:00 PM
    • #5
    • 16th Jun 17, 1:00 PM
    I thought that if I just "gifted" them the money to pay off their mortgage, it would be subject to capital gains tax. Is this not the case?
    Originally posted by ent_moot
    Gifts are not taxable. You could gift them a hundred and twenty grand if you like and the taxman would not care a jot.* What they do with the money would be up to them - whether they pay off the mortgage or go on a round the world cruise it wouldn't result in a tax liability.

    OTOH if you buy yourself a share in their house you might be setting yourself up with CGT tax issues in the future - as their house is not your main residence then AIUI you would be liable for CGT on any increase in value (on your share) between now and whenever it's sold.

    Also any rent they paid you would be taxable income, from your point of view.

    *The one exception would be if you were to die within 7 years of making the gift, in which case it would be counted as part of your own estate for inheritance tax purposes, subject to some annual allowances and taper relief.
    • teddysmum
    • By teddysmum 16th Jun 17, 1:03 PM
    • 7,743 Posts
    • 4,582 Thanks
    teddysmum
    • #6
    • 16th Jun 17, 1:03 PM
    • #6
    • 16th Jun 17, 1:03 PM
    Their paying rent would bring in taxation and legalities involved in being a landlord.


    If you loan the money at 0% as suggested, you wouldn't be losing a lot because interest rates are poor, so they wouldn't be taking much from you, by not paying rent , as they would know that you'd get your money back eventually.


    Would you not need a solicitor to make the charge on the property (protecting your interests) official ?
    • xylophone
    • By xylophone 16th Jun 17, 4:31 PM
    • 21,603 Posts
    • 12,420 Thanks
    xylophone
    • #7
    • 16th Jun 17, 4:31 PM
    • #7
    • 16th Jun 17, 4:31 PM
    Why not make your parents a regular monthly gift from your income to assist them with their living costs?
    • kidmugsy
    • By kidmugsy 16th Jun 17, 4:50 PM
    • 9,317 Posts
    • 6,109 Thanks
    kidmugsy
    • #8
    • 16th Jun 17, 4:50 PM
    • #8
    • 16th Jun 17, 4:50 PM

    >>But then you (and they) are going to consult solicitors anyway, aren't you?

    I would prefer not to - if it can be done legitimately without wasting money on solicitors bills
    Originally posted by ent_moot
    Oh dear me. Do you do all your own plumbing, electrics, gas, and car repairs too?
Welcome to our new Forum!

Our aim is to save you money quickly and easily. We hope you like it!

Forum Team Contact us

Live Stats

3,363Posts Today

8,283Users online

Martin's Twitter