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Advice on Buying Property from Dad (Mortgage/Tax Query)
Jaxer
Posts: 204 Forumite
Dad has a property thats been run down over the past few years and is in pretty bad shape. Fair market value in its current condition is probably £150K.
Obviously, for tax purporses the sale will go through as £150K. But, dad doesn't need the money immediately, and in the short-term, I'll be looking to get a mortgage of around £100K (to pay off the current mortgage of £75K and use the balance for repairs/building work).
Will the bank/lender have a problem with the sales value being shown at £150K (being the market value to keep the tax man happy), but only seeing £75K physically going to the vendor (ie. my dad) out of a mortgage of £100K?
This is the first step on the property ladder so grateful for any input.
Obviously, for tax purporses the sale will go through as £150K. But, dad doesn't need the money immediately, and in the short-term, I'll be looking to get a mortgage of around £100K (to pay off the current mortgage of £75K and use the balance for repairs/building work).
Will the bank/lender have a problem with the sales value being shown at £150K (being the market value to keep the tax man happy), but only seeing £75K physically going to the vendor (ie. my dad) out of a mortgage of £100K?
This is the first step on the property ladder so grateful for any input.
0
Comments
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its called gifted deposit, your Dad is effectively gifting you a deposit of £50,000. Not sure if all lenders will accept this, as really you are getting a 100% mortgage on the price you are paying. you may have to get a written statement from your Dad saying he won't require repayment of the £50k. I would suggest seeing a whole of market mortgage broker, they will knoww hich lenders will accept this deal.I'm a Forum Ambassador on the housing, mortgages & student money saving boards. I volunteer to help get your forum questions answered and keep the forum running smoothly. Forum Ambassadors are not moderators and don't read every post. If you spot an illegal or inappropriate post then please report it to forumteam@moneysavingexpert.com (it's not part of my role to deal with this). Any views are mine and not the official line of MoneySavingExpert.com.0
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In respect of tax, registering the sale at market value means Stamp Duty will be paid at the 1% rate, which is your responsibility as buyer, so no problem there.
If this isn't your Dads main home then he may/probably will have a liability to CGT. There are a number of reliefs available so it may not be as much of a problem as it sounds. On the info available it's impossible to say.
A gift isn't, in itself, usually taxable but there may be IHT considerations if your Dad dies within 7yrs and his estate is worth more than £285k this year, £300K[?] next tax year. Again not possible to say whether it's an issue or not.
Post more details - better on the Cutting Tax thread, I think - if either/both could be an issue you want to know more about.0 -
It is called a concessionary purchase, and they are actually quite common.
The available mortgage options are limited however there are lenders out there (one is part of the HBOS group) who will accept a concessionary deposit as long as it is non-repayable.
Andy0
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