Buying a property from a family member at below market value

Chilly-1

My Aunt currently has £7k to pay on the mortgage for her home which is valued at c£120,000.
She has asked me to purchase the house at c£60-70k and allow her to ramain in the property, rent free until her death (she is 63 yrs old).
I have no capital for a deposit and earn c£23k per annum.

I would like to know what the potential issues are in terms of

• Getting a mortgage (am I likely to be given one?)
• Inheritance/capital gains tax
• Any other issues

I'm desperate to help her remain in her home and enjoy the remainder of her life.
I would also like some guidance on how to proceed!

Please help!!!!

bryanb

Your most likely problem will arise if she needs residential care, if she cannot cover the fees the LA will probably say she has disposed of the house to avoid the fees, and assume she still has the value of the property.

Chilly-1

Thanks, but she has family members who are able to support her, and should be able to retain at least 10-20k in savings. plus she has a couple of long term pensions which should be of help.
Could you see any potential issues with the process of selling a property cheap?

themull1

why doesnt she just pay the 7000 off the mortgage and leave you the house when she dies? or you pay the £7000 off for her in a loan and she leaves you the house when she dies, does she have children? don't know if they would be too happy about her practically giving her house away when its nearly been paid off.

bryanb

If she can fund care when it's needed, the only other problem that comes to mind is Stamp duty, but it looks as though it's below the threshold. CGT would be payable when you sell if it's not your primary residence.

Ulfar

I think you have underestimated the costs of residential care, it can very easily be £1000 per week, at this rate she won't have long if she only has savings of £10-20k.

Annisele

I'm not sure the OP gets a great deal out of this.

If they buy the house at £60k when it's 'worth' £120k, then in theory they get a free £60k. However - they don't actually get use of the house until the aunt's death. The OP could be paying a mortgage on the aunt's house for a very long time, and thus not able to afford to buy their own property until the aunt has died.

Is the aunt unable to pay the £7k mortgage on her own, or is it that she wants additional funds? Has she considered equity release?

00ec25

with no capital for a deposit you will not get a mortgage, particularly if the aunt wants £60-70K since that is nearly the maximum multiple of your salary that lenders would give you if you had a deposit. With no deposit there are very few who will give you 100% mortgage on a property these days even if there is very large amount of equity in the property because you are buying it at a discounted price

the best advice you've had is from themull and annisele, if she can no longer afford her mortgage and so will not be able to pay off the remaining £7k, then it will be a lot cheaper for you to borrow £7k than it will be to borrow £70k

MobileSaver

Chilly-1 wrote: »

Could you see any potential issues with the process of selling a property cheap?

To be able to offer sensible advice, you need to explain in more detail what you are trying to achieve.

Is she struggling to pay the mortgage? Just wanting to release equity? Wants to help you get on the property ladder? Or something else?

Chilly-1

MobileSaver wrote: »

To be able to offer sensible advice, you need to explain in more detail what you are trying to achieve.

Is she struggling to pay the mortgage? Just wanting to release equity? Wants to help you get on the property ladder? Or something else?

She is not struggling to pay the mortgage, she simply wants security in the house for the remainder of her life and to be able to enjoy those years with some money to spend.
Residential care is not likely to be needed as she is married and in average health (not poor, but not fantastic).

She has additional debts of circa £30k (including the mortgage). she would like to clear these and remain in the house rent free for the remainder of her life. She does not wish to use an equity release scheme as they will take a fair amount of equity for a relatively low cash sum. Her husband is also not named on the house but currently resides with her in the property (which could complicate things). She has made all previous mortgage payments for the house and has only married in the last 5 years. the husband is happy with the proposed situation.

The children & family members are not interested in the situation - other than wanting her to be free of debt & worries, although I have promised that should this go ahead, and the house be sold upon her death, I would make contributions to her children (amount to be agreed) from the proceeds while retaining an amount (circa 120k) for myself.

One amendment to the initial post - similar houses are curently selling at circa £140k

amcluesent

I suggest you loan your Aunt £7000 which she uses to pay off the mortgage, possibly with the interest 'rolling up'. When she passes way, the capital and interest will be a charge against her estate which would be offset against IHT (if any!). AFAIK this debt would be repaid before any allocations set out in her will.

TBH honest it all sounds rather odd when she's married with own children!