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    • Hanko2983
    • By Hanko2983 3rd Jan 18, 9:58 AM
    • 10Posts
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    Hanko2983
    Difficult situation
    • #1
    • 3rd Jan 18, 9:58 AM
    Difficult situation 3rd Jan 18 at 9:58 AM
    Hello all,

    I have a question that I'm struggling with.

    My wife and I rent from my mother in law who will be selling the house to gift us £100,000 to help with a deposit for our first house. I also will be inheriting £30,000 from the sale of my grandparents house.

    We plan to use this £130,000 as our deposit.

    My question is how would this work during the process as I've read we would need to pay 10% deposit of the value of the property to secure the property we would intend to buy at the contract stage. Would it still work as a chain even though we don't own the property? Or would we essentially be "homeless" for a short period until we receive the funds from my mother in law from the sale of her property?

    If so, I guess we could use the £30,000 from my inheritance towards the 10% deposit required.

    I hope that makes sense? I couldn't stop thinking about it last night and wouldn't want to get all the way to completion for it to collapse at the final hurdle.

    Cheers
Page 1
    • bouicca21
    • By bouicca21 3rd Jan 18, 10:07 AM
    • 3,378 Posts
    • 4,425 Thanks
    bouicca21
    • #2
    • 3rd Jan 18, 10:07 AM
    • #2
    • 3rd Jan 18, 10:07 AM
    Yes it's a chain. Furthermore your MiL won't be able to sell the house with you in it as tenants, so you will have to move out. Is there any reason why you can't simplify matters by buying her house?
    • Hanko2983
    • By Hanko2983 3rd Jan 18, 10:14 AM
    • 10 Posts
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    Hanko2983
    • #3
    • 3rd Jan 18, 10:14 AM
    • #3
    • 3rd Jan 18, 10:14 AM
    There is no legal tenants contract so is that still a problem. If we put the property in our name we wouldn't be FTB so would have to pay stamp duty of £3,000
    • Pixie5740
    • By Pixie5740 3rd Jan 18, 10:18 AM
    • 11,376 Posts
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    Pixie5740
    • #4
    • 3rd Jan 18, 10:18 AM
    • #4
    • 3rd Jan 18, 10:18 AM
    There is no legal tenants contract so is that still a problem. If we put the property in our name we wouldn't be FTB so would have to pay stamp duty of £3,000
    Originally posted by Hanko2983
    You pay rent in exchange for exclusive occupation of the property therefore a legally binding tenancy does exist.

    I don't get your second point. If you are FTB you are FTB regardless of whom you buy the property from.
    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.
    • Aylesbury Duck
    • By Aylesbury Duck 3rd Jan 18, 11:32 AM
    • 1,353 Posts
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    Aylesbury Duck
    • #5
    • 3rd Jan 18, 11:32 AM
    • #5
    • 3rd Jan 18, 11:32 AM
    Why can't your mother in law simply sell the house to you? You will be FTBs and therefore will save the stamp duty. If the numbers don't work, then you move out, MIL sells the house, gifts you whatever she wishes to and you are FTBs on whichever property you buy.

    And as Pixi5740 has pointed out, you have a legal contract in place. Does your MIL declare the rental income you pay her for tax purposes? Does she fulfil her other legal responsibilities as a landlord?
    • Hanko2983
    • By Hanko2983 3rd Jan 18, 11:53 AM
    • 10 Posts
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    Hanko2983
    • #6
    • 3rd Jan 18, 11:53 AM
    • #6
    • 3rd Jan 18, 11:53 AM
    If we put the house in our name and then sell we would have to pay stamp duty right? We want to move, not stay in current property.
    • Hanko2983
    • By Hanko2983 3rd Jan 18, 11:56 AM
    • 10 Posts
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    Hanko2983
    • #7
    • 3rd Jan 18, 11:56 AM
    • #7
    • 3rd Jan 18, 11:56 AM
    The best option would be for my MiL to sell and we move out, then gift us the money. Only problem would be we have 2 small children and nowhere to live.
    • Aylesbury Duck
    • By Aylesbury Duck 3rd Jan 18, 12:06 PM
    • 1,353 Posts
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    Aylesbury Duck
    • #8
    • 3rd Jan 18, 12:06 PM
    • #8
    • 3rd Jan 18, 12:06 PM
    How much is the house worth? It's a little more complicated than just "putting it in your name" for a start, but yes, if you become the owner of the current house, you are a first time buyer of that house and won't be FTBs of any other houses in future.

    If you want to move, then yes, your MIL sells the house and gifts you the money. But I ask again: Is she currently declaring the rental income from your tenancy and fulfilling her other obligations as a landlord? You have a legal tenancy which will have to be ended before the house can be sold.
    • Hanko2983
    • By Hanko2983 3rd Jan 18, 12:30 PM
    • 10 Posts
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    Hanko2983
    • #9
    • 3rd Jan 18, 12:30 PM
    • #9
    • 3rd Jan 18, 12:30 PM
    The house is worth £170,000. Why is it more difficult than you think?
    • bouicca21
    • By bouicca21 3rd Jan 18, 12:39 PM
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    bouicca21
    You are a tenant. No normal buyer will get a mortgage on a tenanted property, they will require vacant possession. your promise that you will move out won't be enough to satisfy a lender. You will have to be living elsewhere at the time of exchange.
    • Aylesbury Duck
    • By Aylesbury Duck 3rd Jan 18, 12:41 PM
    • 1,353 Posts
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    Aylesbury Duck
    Not more difficult, more complicated. Look at the processes that have to be gone through in a house purchase. If you were to go down the route of taking ownership of the house you currently rent, essentially you would be purchasing the house from your MIL. That's not just a case of her writing a letter gifting it to you.

    I'll try asking a third time because you're either missing the question or being evasive: Is your MIL currently declaring the rental income from your tenancy and fulfilling her other obligations as a landlord?
    • MEM62
    • By MEM62 3rd Jan 18, 12:51 PM
    • 1,413 Posts
    • 1,030 Thanks
    MEM62
    The best option would be for my MiL to sell and we move out, then gift us the money. Only problem would be we have 2 small children and nowhere to live.
    Originally posted by Hanko2983
    Then you will have to rent for a while. It is unlikely that the sale of you MIL's house and the completion of your purchase could be times for the same day. And even if planned that way, thing do go wrong.

    You only way of ensuring a roof over your heads in the interim period is to rent.
    • Mgman1965
    • By Mgman1965 3rd Jan 18, 6:04 PM
    • 83 Posts
    • 88 Thanks
    Mgman1965
    Not more difficult, more complicated. Look at the processes that have to be gone through in a house purchase. If you were to go down the route of taking ownership of the house you currently rent, essentially you would be purchasing the house from your MIL. That's not just a case of her writing a letter gifting it to you.

    I'll try asking a third time because you're either missing the question or being evasive: Is your MIL currently declaring the rental income from your tenancy and fulfilling her other obligations as a landlord?
    Originally posted by Aylesbury Duck
    I think we can safely assume the rent is undeclared to HMRC then and is a cash in hand transaction.
    • Aylesbury Duck
    • By Aylesbury Duck 3rd Jan 18, 6:34 PM
    • 1,353 Posts
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    Aylesbury Duck
    I think we can safely assume the rent is undeclared to HMRC then and is a cash in hand transaction.
    Originally posted by Mgman1965
    You’re probably right, hence the immediate cessation of responses when pressed on it. If so, it puts the OP and his MIL in an interesting position. He wishes to avoid paying one form of tax (stamp duty) but his preferred route to achieving that might lead to questions being asked about possible tax avoidance by his mother in law.
    • dimbo61
    • By dimbo61 4th Jan 18, 7:47 PM
    • 9,653 Posts
    • 5,209 Thanks
    dimbo61
    If we put the whole question about paying tax on rental income and Landlord responsibility to one side at the moment.
    If the figures add up could you afford to buy the new property with the £30,000 inheritance from your gran as the deposit and your income ?
    Have you saved some money yourself ?
    Is the house your are living in now ready to go on the market ? Will it sell quickly ?
    Could you look at an offset mortgage and pay the lump sum into the offset savings she has promised once she has sold the house !
    If you could get a 2 year fix and offset you would have a new home and money in the bank ��
    Last edited by dimbo61; 04-01-2018 at 7:50 PM.
    • Hanko2983
    • By Hanko2983 6th Jan 18, 8:09 PM
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    Hanko2983
    Hello,

    I can confirm my MiL does declare our rent to HMRC. She's an OAP and retired. I'm sorry if you presumed I was evading your questions but my MiL's tax is not my business. We've been privately renting and living with her while she has been very unwell and also going through a divorce.

    She has since had a settlement from the divorce and has now moved into a new property.

    She would like to sell the house we are in, gift us the money plus the £30k from my grandmother a purchase a new house.

    We are well aware of the capital gains tax.

    What I have been trying to establish is the process of MiL selling the house, gifting us the money, and us buying a new house all in "a chain". Estate agents we have spoken to have all said it wouldn't be a problem but just wanted to check to see if anybody on here would be familiar with this type of scenario?

    Many thanks.

    We have decided
    • bouicca21
    • By bouicca21 6th Jan 18, 8:55 PM
    • 3,378 Posts
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    bouicca21
    How many times do you want to be told the answer? It isn't straightforward, it is a problem.
    • davidmcn
    • By davidmcn 6th Jan 18, 9:01 PM
    • 6,542 Posts
    • 6,449 Thanks
    davidmcn
    How many times do you want to be told the answer? It isn't straightforward, it is a problem.
    Originally posted by bouicca21
    Not sure it's all that much of a problem - unlike a "standard" tenant, the OP is actually a party in the chain, so obviously has an interest in allowing vacant possession, as they're moving too on the same day.
    • Hanko2983
    • By Hanko2983 6th Jan 18, 10:21 PM
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    Hanko2983
    Exactly, thank you for your understanding. I really don't think that is ging to be an issue as we are family and would be moving on the same day. It's the financial aspect that I'm interested in. The transfer of the funds from the buyer to my MiL to us as cash gift and then us on to our seller?
    • davidmcn
    • By davidmcn 6th Jan 18, 10:25 PM
    • 6,542 Posts
    • 6,449 Thanks
    davidmcn
    Exactly, thank you for your understanding. I really don't think that is ging to be an issue as we are family and would be moving on the same day. It's the financial aspect that I'm interested in. The transfer of the funds from the buyer to my MiL to us as cash gift and then us on to our seller?
    Originally posted by Hanko2983
    Again, can't really see a problem assuming that your MiL and you use the same solicitor.
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