Family mortgage

Kittikins

My lovely parents have come to me with a very interesting proposal which needs a lot of fleshing out regarding my scarily large mortgage . Would anyone be able to give any advice on what would need to be done, to ensure that I don't have a whopping tax bill/any legal bits?

They are proposing to pay off my existing mortgage (effectively buying my house, but keep it in my name if that's possible) and then have me repay them a fixed amount each month, as an interest-free loan, on the understanding that if (as is likely) they die before I pay the mortgage off, the amount remaining will be taken out of my share of inheritance.

The mortgage amount is £148,000 and they've said they wouldn't be "Rackman landlords" and I'd pay a reasonable monthly amount that would be less than my current repayment mortgage amount.

I'm guessing this might be seen as a gift and they'd need to live for 7 years after doing it or I'd pay tax on it??

We have also agreed that if I ever move a new partner into the house, we'll need to get a legal agreement in place that that person will have no financial interest in the property ever, and as and when I sell and move, I pay them back first and then the rest will be my deposit for a new property.

This sounds like a fantastic deal for me, but we need to work out how it would work logistically. Can anyone help?

Thrugelmir

Kittikins wrote: »

I'm guessing this might be seen as a gift and they'd need to live for 7 years after doing it or I'd pay tax on it??

No. The outstanding balance would be treated as if they still had the cash and added to their estate to calculate their IHT liability.

Idea is sound. Speak to a solicitor so that a proper legal agreement is drawn up to cover the eventualities including those you outlined.

getmore4less

I think you have two basic options.

The interest free loan with a charge over the property as you describe just needs a bit of legal work to set up.

Alternatively

A YBS offset plus with a family(and friend) pot your parents own.

The advantage of the second is that they can get ALL their money back at any time since it is never yours.

They can decide the payment rate and take it out of their offset pot, you decide how much you want to put back into your offset pot if it is less you start paying a bit of interest. no problems with the new GF grabbing the money either.

Kittikins

Thanks both very much for your advice, I think I need to go and see a solicitor to get some documents drawn up - and hope that they were genuine in their offer, not just idly wondering where to stash their cash!

Getmore4less, unfortunately having done a calculation on the YBS website, they wouldn't lend me anywhere near the amount I need

getmore4less

Kittikins wrote: »

Thanks both very much for your advice, I think I need to go and see a solicitor to get some documents drawn up - and hope that they were genuine in their offer, not just idly wondering where to stash their cash!

Getmore4less, unfortunately having done a calculation on the YBS website, they wouldn't lend me anywhere near the amount I need

So are you totaly dependant on the loan can you afford this house if they pull the loan or die?

what about a combo part gift/part offset

edit: actualy just realised if they have £140k spare and a house there may be IHT things to consider

ManicMum

I would say this best to avoid!! It's the bit about the future partner having no interest in the property. You don't know what the future will bring. You need to be flexible to live your life how you want to and not haviing to involve a third party like this. When I met my hubby I had a property and he had nothing. He is now a joint owner in the property. If I told him he would have no interest in the property at all, I don't think that would be fair - especially as he now pays the mortgage as for long time I earned nothing as stay at home Mum. He is still main earner.

Just think long and hard about how your future could change. Have you thought about downsizing?

Kittikins

Hi ManicMum, unfortunately I've tried to downsize twice but unfortunately couldn't sell my house either time

getmore4less

Kittikins wrote: »

Hi ManicMum, unfortunately I've tried to downsize twice but unfortunately couldn't sell my house either time

You are asking to much for it.

Kittikins

Thanks!