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    • ichidan
    • By ichidan 26th Sep 17, 5:31 PM
    • 38Posts
    • 12Thanks
    ichidan
    Gifting/Buying parents' House
    • #1
    • 26th Sep 17, 5:31 PM
    Gifting/Buying parents' House 26th Sep 17 at 5:31 PM
    Was wondering if anyone could advise the best approach for this...

    Parent's home valued at £300,000 with a mortgage of £60,000. They want to gift the property to me. I already have a property so this would be a second home. What would be the best way to do this and what costs would be involved?

    - How much could I realistically borrow, and what would determine this? As a BTL, I presume mortgage providers would have a max. LTV that I could borrow at? Would my own income or any other loans/mortgages be taken into account?

    - Could I avoid paying stamp duty by paying off the remaining £60,000 mortgage thus my parents would be gifting me an unencumbered mortgage? Are there any other tax implications (Would I even need to pay off all of it? Or just enough to have the outstanding mortgage below the £40,000 SDLT threshold, and then selling the property at that)

    - Also, not sure if possible, but could I get a loan to pay off the £60,000 outstanding or remortgage my main property, free up some equity to clear this prior to purchasing to avoid a hefty SDLT bill?

    Apologies if any of these questions have been asked before.
Page 2
    • ichidan
    • By ichidan 8th Oct 17, 1:59 PM
    • 38 Posts
    • 12 Thanks
    ichidan
    If you're going to be renting the property out to someone else, and effectively because you are inheriting the property, it sounds to me like a consumer buy to let, which will probably reduce the amount of lenders available to you. Or if you allowed your parents to continue living there, and if they paid you rent, it would be a regulated buy to let.
    Originally posted by glosoli
    I'll have to google this term. I'm guessing this is why they came back with vida homeloans rather than one of the more well known lenders like Halifax, RBS etc.?
    • getmore4less
    • By getmore4less 8th Oct 17, 1:59 PM
    • 29,996 Posts
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    getmore4less
    Why do they need to trust you won't make them homeless by kicking them out if they are leaving anyway.


    There are going to be cheaper ways to raise £60k without £30k of fees you currently have.
    • Keep pedalling
    • By Keep pedalling 8th Oct 17, 2:36 PM
    • 3,750 Posts
    • 4,016 Thanks
    Keep pedalling
    If they don't give away their asset to me, then they will lose the house, which my dad refuses to do as we've lived there 30+ years. It would be impossible to purchase 2 separate properties for mum and dad to live in without them both moving far away from London. At the end of the day, their intention is for me and my brothers to inherit their property, so we're just accelerating that process, and with 1 year left on their mortgage, we need to be pretty quick.

    They trust that I won't kick them out and make them homeless. For nearly 20 years I've financially supported my parents almost entirely (mortgage+bills etc.) with the help of my brothers too. Makes more sense for me (and my brothers) to own the property and use it as revenue to finance them. My parents (in particular my dad) are not good with money, the whole mess with the mortgage being interest only and not having it paid off already is because my dad remortgage the house 20 years ago to do a business that didn't end well. Their assets are in safer hands if we own it.

    I'm not too sure about equity release. I think my current route will be more economical in the long run, but I'll look into it.
    Originally posted by ichidan
    But your solution appears to leave them living apart. Equity release is likely to effect your eventual inheritance, but costs them nothing and provides them with long term security. As they appear to be resigned to moving from their existing home them downsizing would seem to be the best option, it neither deprives them of their major asset or requires them to split up, and protects your inheritance better than equity release.
    • regprentice
    • By regprentice 8th Oct 17, 10:34 PM
    • 655 Posts
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    regprentice
    Its not illegal for your parents to live in a home on which you have a mortgage, however its not desirable for mortgage providers and a difficult situation to mortgage.

    My wifes uncle (65) has just been diagnosed with terminal cancer. He's spent years planning a tax efficient way of disposing of his fathers (93) property when he eventually passes away, including securing planning permission to split the home into 2 flats. All for nought as his father will now almost certainly outlive him. My uncle also died before his own mother. What happens if your parents outlive you, will your wife continue to house one of them...? Will the other be secure in the small property you buy (mortgage?) for them? The comments made about equity release and downsizing had your parents long term interests at heart.
    • getmore4less
    • By getmore4less 9th Oct 17, 8:29 AM
    • 29,996 Posts
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    getmore4less
    I will use some of the equity in the property to buy a small home for one parent,


    what's happening to the other parent?

    Missed this earlier you will be buying for more than the £60k to clear the mortgage.
    if you need more money and buy them a house with some of it SDLT will need to factor in that you are housing them.

    WHY do you need to own the place you put them in why can't they own that?

    Seems to me you are going about this all wrong and creating a 30k bill with very high broker & mortgage fees.

    Regular purchase for enough for them to buy their own place an clear the mortgage with the rest as a gift.

    How much do you need to do that?
    • Pixie5740
    • By Pixie5740 9th Oct 17, 9:46 AM
    • 11,001 Posts
    • 15,176 Thanks
    Pixie5740
    If you think this is a bizarre way to go about something that could be relatively straightforward you should see the OP’s thread about housing benefit.
    Annual income twenty pounds, annual expenditure nineteen pounds nineteen and six, result happiness. Annual income twenty pounds, annual expenditure twenty pounds nought and six, result misery.
    • ichidan
    • By ichidan 9th Oct 17, 11:31 AM
    • 38 Posts
    • 12 Thanks
    ichidan
    If you think this is a bizarre way to go about something that could be relatively straightforward you should see the OP’s thread about housing benefit.
    Originally posted by Pixie5740
    Aha! There it is! I was wondering why you were calling me a tosser out of the blue. You were basing this on something I had posted before. Bigot, please don't post in this thread, as you seem to have nothing positive to contribute and know nothing of my personal circumstances. You're merely throwing this off-topic.

    For those who are concerned about the moral aspect of this. I'll clear it up for you:

    1. My parents live in the same house, however one sleeps upstairs and one sleeps downstairs. They rarely talk to each other, and are better off divorced and living apart than together at the risk of killing eachother. They don't have a good relationship. Typical 'Eastenders' nonsense, that people like you love. Ok happy now?

    2. I have financially supported my parents for a long time, bailed my dad out of multiple £10k+ debts for things like him not paying council tax, bad business deals, and generally doing financially unwise things.

    3. While I grew up as 'benefit scum', I managed to self-educate myself and now have a very good job in the city and can financially support myself, my family, my parents, along with a close family friend and her children who are on benefits.

    Until you have walked a yard in my shoes, don't bother contemplate assuming the moral high ground.

    ---------------

    My parents property is valued at £500k, with 70k outstanding on the mortgage. They want to gift me the property as the mortgage will run out in a years time. We want to remortgage the property to free up roughly 180-200k of equity so that we can buy a cheap property for my mum to live in, while my dad lives in a partition inside the remortgaged property, while the rest of the property is rented out. The rental income will cover the mortgage repayments, my dad's accommodation, and generate a profit. What is the best way to do this? How much would it cost? I repeat SELLING the house is a no deal (as my Dad doesn't want to, and there is not enough equity in the house to afford to buy 2 properties in London)

    I'll deal with whatever problems may arise in the future. Thank you for being so concerned about my personal circumstances. I just wish you'd help answer the financial/legal aspect of this, instead of diverting the topic to some MoralAdviceExpert forum.
    • ichidan
    • By ichidan 9th Oct 17, 11:34 AM
    • 38 Posts
    • 12 Thanks
    ichidan
    WHY do you need to own the place you put them in why can't they own that?
    Originally posted by getmore4less
    1. I don't believe they can get a BTL mortgage to rent out the property. They already have a pretty bad 5% interest only mortgage deal with Kensington Mortgages despites a LTV <20%. Maybe they can I don't know, and if they can free up 180k equity on the place so that they can buy a property by the seaside for my mother & renovate the house, then maybe it can work.

    2. Eventually I will inherit the property. This is just accelerating the transition, and avoiding potential inheritance tax in the future.
    • ichidan
    • By ichidan 9th Oct 17, 12:27 PM
    • 38 Posts
    • 12 Thanks
    ichidan
    But your solution appears to leave them living apart.
    Originally posted by Keep pedalling
    Apologies this may not have been clear in my earlier posts. Them living apart is the whole idea. They have a dysfunctional relationship, or effectively no relationship. My mother has wanted to leave my father for many years, and now he has on board with the idea as well.

    Equity release is likely to effect your eventual inheritance, but costs them nothing and provides them with long term security.
    Originally posted by Keep pedalling
    That's true, however my view of the world is a bit different. I'd rather endure more pain now, for a bigger reward in the future.

    As they appear to be resigned to moving from their existing home them downsizing would seem to be the best option, it neither deprives them of their major asset or requires them to split up, and protects your inheritance better than equity release.
    Originally posted by Keep pedalling
    Ok I wasn't upfront with everyone on everything from the start, as I was only interested in finding out what steps were required and how much it would all cost to take possession of the property... My father refuses to get rid of the house. The house must stay in the family. Whether he is living there or not. The original proposal was for him to continue living in the living room, and us building a partition so that we could rent out the rest of the house. Remortgaging the house would free up equity to buy a cheap property by the seaside for my mother.

    Believe me, if I had known I would've paid off the outstanding 70k over a 5 year period before. So that they could just gift the property without any of this mess. But I didn't ask questions, just paid their mortgage unconditionally while my dad said it was an endowment mortgage (as opposed to just interest only). So a lot of mistakes along the road, and I was more focused on what was going on in my own life to care. But now, I'm trying to sort things out. We all mess up in life, it's about trying to salvage the situation for the best, and that's what I'm trying to do here. This isn't about scamming people.
    • Pixie5740
    • By Pixie5740 9th Oct 17, 12:31 PM
    • 11,001 Posts
    • 15,176 Thanks
    Pixie5740
    Bigot? My referral back to your previous thread has nothing to do with the claiming of housing benefit but to point out that you have a habit of taking something simple and making it complicated.

    The tosser comment was because you told me to re-read your OP which was pointless since your OP was clear as mud regarding who would be living where and what you were trying to achieve.

    You are not articulating yourself well, your story chops and changes. We started off with a property valued at £300k which is now worth £500k. You and your siblings have both bailed out your parents yet you are the only one who will receive a £500k property for £60k. Your father doesn’t want to lose the property yet he won’t have it if he sells it to you nor will he be living in it.

    You and your parents each need to take separate legal advice. What you are proposing is the least tax efficient way of going about things, leaves both your parents very vulnerable and will fall foul of deprivation of assets.

    If you don’t like the comments you receive don’t post on a public forum.
    Last edited by Pixie5740; 09-10-2017 at 12:33 PM.
    Annual income twenty pounds, annual expenditure nineteen pounds nineteen and six, result happiness. Annual income twenty pounds, annual expenditure twenty pounds nought and six, result misery.
    • Jenniefour
    • By Jenniefour 9th Oct 17, 1:35 PM
    • 1,162 Posts
    • 1,140 Thanks
    Jenniefour
    Some of this is mightily confusing.

    If they don't give away their asset to me, then they will lose the house, which my dad refuses to do as we've lived there 30+ years.

    But they are going to lose it anyway - unless they can find a suitable equity release scheme and decide they can put up with each other.

    It would be impossible to purchase 2 separate properties for mum and dad to live in without them both moving far away from London.

    So your parents are actually ending their marriage. Would have been helpful to know that at the start. So there would be zero possibility of your father staying in the house anyway.


    At the end of the day, their intention is for me and my brothers to inherit their property.

    Is it, though? Or is it a way of trying to get back at least some of the money back you've all spent over the years, as below?

    For nearly 20 years I've financially supported my parents almost entirely (mortgage+bills etc.) with the help of my brothers too.

    My parents (in particular my dad) are not good with money, the whole mess with the mortgage being interest only and not having it paid off already is because my dad remortgage the house 20 years ago to do a business that didn't end well. Their assets are in safer hands if we own it.
    Originally posted by ichidan
    What a mess.

    What you're proposing sounds very convoluted, and it's hard to understand what exactly your parents, and your brothers and yourself are trying to achieve. Your parents need to seek legal advice about ending their marriage, as well as the rest.

    And, no, the house doesn't have to stay in the family. It seems to be a preference but it's not a must and in these circumstances (parents ending their marriage) it might be very important to their future well being not to keep the house. Problem is once something is ruled out that doesn't need to be ruled out, then it seriously limits what other options might be appropriate.
    Last edited by Jenniefour; 09-10-2017 at 1:42 PM.
    • getmore4less
    • By getmore4less 9th Oct 17, 2:18 PM
    • 29,996 Posts
    • 17,927 Thanks
    getmore4less
    Part of the issue(a lot of people make the same mistake) is you described a solutions without describing the problem and goals.

    You are moving down a road with a solution that has £30k in fees for the need of £60k/£70k. + some to buy mum a place.

    trying to summarise.
    problem.
    Parents live in a house and hate each other.
    £60k/£70k mortgage comes to an end in 1 year.
    house value £500k ish

    Goal.
    Cheap property by the sea for mum.
    Have somewhere for dad to live either new place or part of existing house.
    Resolve the mortgage running out.

    Creating an annex in this house for dad to live in is going to introduce all sorts of problems with lenders, council and IHT, you need to work through those before considering that option.

    Going to need multiple kitchens to start

    How much can you and brother raise between you NOT on this property?
    investigate your parents borrowing against the property.

    Since the idea is to keep in in the family why don't other family move in like yourself.

    (Renting it out it just becomes a rental and not a family home)

    ..............................................
    since you will be paying anyway have you considered a second residential mortgage on second home for your mum to live in(needs to be no rent)

    if you can support that borrowing and can find a deposit that may be the cheapest way to house your mum even with some extra SDLT

    That leaves your dad with his place, if you can raise that money you could pay off his mortgage by lending him that money then he has a mortgage free house to do the split and rental, using the rental income to pay back the debt.

    No SDLT retains the PRR, go gift with reservation, simpler borrowing if you can raise it on your own property so reduced fees.
    Last edited by getmore4less; 09-10-2017 at 2:22 PM.
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