Can I add my sons name to a mortgage?

56cheffy

I have 4 properties that I let out, can I add my sons name to the deeds?

I am wanting to do this so that when I 'pop my clogs' he does not have to sell them on as they would then give him a decent rental income.

As I understand it, at the moment he would have to sell them to pay off the mortgages despite the fact that the rental income far exceeds the mortgage payments.

I am 54 and widowed, he is a single 20 yr old student.

Thanks.

CloudCuckooLand

Are they BTL mortgages? Obviously they need to be, to ensure his income would be sufficient not to have to sell them anyway, upon your death. (and because renting them out needs them to be - have to ask because some people bend the rules..!)

Depending on values, there may be a SDLT cost for transferring portions of mortgaged properties.

The lender will need to agree, as they are mortgaged. Might be a £200 (ish) paperwork charge per mortgage for adding a name. He'll likely need credit checking by them. Ask the lender, the process various slightly at each.

If either of you has (or comes to have) poor credit, it could tie you together in a way that damages access to future credit. i.e. suppose you live to 90, he'll be 55 and long wanted a mortgage of his own...

You are creating a CGT liability for him when he does get his own place.

If you died within 7 years, an IHT issue, too...

Probably need your whole estate looked at, by accountant/tax-planning expert to do things in a combination that suits the whole picture.

56cheffy

CloudCuckooLand....Many thanks for the informative reply ...they are indeed BTL's (all above board here)...

I appreciate that I do need my estate looked at beforehand by an expert in such matters but just wanted to know if it was possible.

Thanks

00ec25

CloudCuckooLand wrote: »

You are creating a CGT liability for him when he does get his own place..

agreed
however more importantly you will also immediately have a CGT liability for yourself now

this is because you are effectively gifting him a share of whatever equity has built up in the places since you bought them. CGT rules are very precise where there is a transaction involving parent and child ("connected persons") and treat any transfer as a formal CGT "event" meaning you , as the current owner, are treated as having disposed of the transferred share even if you give it to him for no consideration
. HMRC wil requre you to pay CGT on the gain you yourslef have made since purchase and you must use the open market value as the "sales" price in your calculation

as said - go see a tax adviser

chromofoam

ask a Tax Adviser/Accountant and speak to your lender.

56cheffy

00ec25
That is a VERY useful piece of information..many thanks....based on that, I don't think I will be going ahead with it!

00ec25

56cheffy wrote: »

00ec25
That is a VERY useful piece of information..many thanks....based on that, I don't think I will be going ahead with it!

don't be too hasty to forget about it - the IHT implications could cost a lot more in the long term

obviously you will need the cash to pay the tax bill now but remeber the top rate of CGT is (currently) 28% whereas if you do not do a transfer (and live 7 years afterwards) then IHT is 40%

you need to do a calcualtion for the totals for CGT now and IHT later and then guess as to whether you think rates will change in the future of course

PS - your CGT liability now will be on the share transfered not thte total gain: ie total original cost of all 4 proeprties £400,000, Current market value £600,000, gain £200,000. If you gift son 50% (ie as a joint tenant) then you'd pay 200,000/2 minus annual allowance * 28% = £25,032 now

IHT wise a 54 year old should live another, what, 25 years? What would they be worth then in your IHT calculation?

56cheffy

Thanks again....

Just had another thought!

IF my son were to get married and IF he were then to subsequently get divorced during my life time, I assume his 'wife' would have a claim on his 50% of the property value!

Another reason to get expert advice!