Buying Second home outright

ClaireFletcher

My husband uses this forum all the time and says its great so thought i'd give it a go. We have a mortgage together which my husband had to get his Dad to go on as well so we could get our first home.

A couple of years ago MY Dad was in trouble with his own Mortgage which he took out around 1985. He is terrible with money and has managed to keep his mortgage at the same level all these years (Approx £20,000) just paying off the interest. He hadn't been paying the interest and almost lost the house through the courts. I stepped in and paid off £10,000 with a loan to help him out. He was supposed to be paying the loan off at £250 a month but hasn't.

He is now again in danger of losing the house to the courts and if he does we will lose the money put into it as well. There is roughly £11,000 remaining on his mortgage and I want to use savings to buy the house off him outright.

I don't know anything about owning a second home and my Husband thinks that we will incur charges or a penalty buying the house from my Dad at such a low price rather than the market value.

Can anyone point me in the right direction for further info to read up on what to do and if it would be worth it. I daren't just pay off the remainder of the mortgage for him because I'm not confident he will pay us any money when it comes to the crunch. He will however transfer the house into my name if I pay the remainder of the monies.

Thanks for any advice or pointing in the right direction

Claire

Let_Us_See

As long as you are buying outright and not utilising a mortgage then your father can sell at any price. However, his existing mortgage will have to be repaid.

Thrugelmir

ClaireFletcher wrote: »

My husband uses this forum all the time and says its great so thought i'd give it a go. We have a mortgage together which my husband had to get his Dad to go on as well so we could get our first home.

A couple of years ago MY Dad was in trouble with his own Mortgage which he took out around 1985. He is terrible with money and has managed to keep his mortgage at the same level all these years (Approx £20,000) just paying off the interest. He hadn't been paying the interest and almost lost the house through the courts. I stepped in and paid off £10,000 with a loan to help him out. He was supposed to be paying the loan off at £250 a month but hasn't.

He is now again in danger of losing the house to the courts and if he does we will lose the money put into it as well. There is roughly £11,000 remaining on his mortgage and I want to use savings to buy the house off him outright.

I don't know anything about owning a second home and my Husband thinks that we will incur charges or a penalty buying the house from my Dad at such a low price rather than the market value.

Can anyone point me in the right direction for further info to read up on what to do and if it would be worth it. I daren't just pay off the remainder of the mortgage for him because I'm not confident he will pay us any money when it comes to the crunch. He will however transfer the house into my name if I pay the remainder of the monies.

Thanks for any advice or pointing in the right direction

Claire

Speak to a solicitor for advice.

A few points to consider.

You could lend your father the money and thereby discharge the mortgage. To secure the loan, have a charge put on the house so that in the event of its sale the loan is repaid.

You would need to buy the house at arms length using solicitors which would incur expense. That I'm not sure is worth it if your father intends to continue residing there.

Transactions can be conducted at undervalue, but should the seller be declared bankrupt for example in a 5 year period post sale. A court can overturn the sale and seek recourse.

By owning a second home you would find yourself liable for capital gains tax on the gain upon sale. Which would be based on the price you purchased it for not the the market value. This is to stop transfer of assets at undervalue to avoid tax liabilities.

ClaireFletcher

Thanks for the replies. When I get the loan to buy the house it will effectively be paying off the remainder of the mortgage and transferring the house into mine and my Husbands name. So we will be getting it for roughly £11,000 and letting my Dad stay living in it.

We're in a sticky situation though because he has already left us thousands of pounds in the lurch by not paying anything to us for the last loan we used to stop him having the house taken away. We are only looking to put another £11,000 in to make sure he doesn't lose the house to the courts and we get it in our name. If he still doesn't pay anything to us then we will have to sell the house and from your replies I can see that this will lead to an 18% capital gains tax. The house is a right state and has only been valued at about £25,000 with other houses in the street going for around the £120,000 mark. So we would need to do it up and then sell it on. It's going to be a pain and all because I tried to help my Dad out and he has kicked it back in our face by not keeping his end of the deal.

C

g_attrill

ClaireFletcher wrote: »

The house is a right state and has only been valued at about £25,000 with other houses in the street going for around the £120,000 mark. So we would need to do it up and then sell it on.

Who did that valuation? I wouldn't have thought it would be worth at least 50% of the value of a perfect house, assuming it at least has a roof and services connected!

ClaireFletcher

g_attrill wrote: »

Who did that valuation? I wouldn't have thought it would be worth at least 50% of the value of a perfect house, assuming it at least has a roof and services connected!

The valuation was done when my Dad nearly lost the house to the courts. Somebody was sent round to do it as part of the repossession but I don't know who appointed them or who they worked for.

Claire

PayDay

ClaireFletcher wrote: »

So we will be getting it for roughly £11,000 and letting my Dad stay living in it.

We're in a sticky situation though because he has already left us thousands of pounds in the lurch by not paying anything to us for the last loan we used to stop him having the house taken away. We are only looking to put another £11,000 in to make sure he doesn't lose the house to the courts and we get it in our name. If he still doesn't pay anything to us then we will have to sell the house and from your replies I can see that this will lead to an 18% capital gains tax. The house is a right state and has only been valued at about £25,000 with other houses in the street going for around the £120,000 mark. So we would need to do it up and then sell it on. It's going to be a pain and all because I tried to help my Dad out and he has kicked it back in our face by not keeping his end of the deal.

Your father also needs to take legal advice before he signs his house over to you.