How to get a mortgage with no deposit but equity?

Brock_and_Roll

Deprivation of Assets has no expiry date as such. It depends on the dilligence of the local authorities involved as to hard they investigate and how far back they look. What I can tell you for certain is that due to being skint they are looking much harder than they used to!

Certainly if your parents were to need long term care in the next few years, the local authorities would spot this deal and (quite rightly) regard it as a depravation and would not provide state funds for care. However, in 10/15 years time, it is questionable whether they would spot/do this.

Presumably aside from the £150k your parents are getting from the house, they have other assets and will already be aware on the rules and limits with regard to care funding, should it become necessary at some point

Thrugelmir

easypeezy wrote: »

as it's their only residence for the past 15+ years.

Are they intending to remain in the property?

Yorkie1

(tradeseeker) spammedy spam

easypeezy

Yes, they would remain in the property for a while then look to buy a smaller house once this sale has gone through (if that ever happens!)...would this be a problem?

kingstreet

easypeezy wrote: »

Yes, they would remain in the property for a while then look to buy a smaller house once this sale has gone through (if that ever happens!)...would this be a problem?

It means the potential Inheritance Tax problem remains for longer than seven years. The taper relief only applies from the point they renounce all claim to the property. If they retain some form of interest in possession by occupying it after the sale, they will fall foul of the gift with reservation rules and the seven year taper period will only commence when they completely sever all ties with the property.

You may be able to circumvent this if they pay you a market rent for the property but they may have to be able to fund this out of income and not by recourse to any of the capital you have paid them.

I suggest legal and accountancy advice before you even start worrying about a mortgage and gifted deposits.

getmore4less

kingstreet wrote: »

It means the potential Inheritance Tax problem remains for longer than seven years. The taper relief only applies from the point they renounce all claim to the property. If they retain some form of interest in possession by occupying it after the sale, they will fall foul of the gift with reservation rules and the seven year taper period will only commence when they completely sever all ties with the property.

You may be able to circumvent this if they pay you a market rent for the property but they may have to be able to fund this out of income and not by recourse to any of the capital you have paid them.

I suggest legal and accountancy advice before you even start worrying about a mortgage and gifted deposits.

Taper relief would not help much if this was the only gift and no previous gifts.

If all from one parent that dies within 7 years there would only be £25k to get relief on. If 1/2 is from each parent no relief at all.

Taper relief only kick in if the total gifts in the previous 7 years exceed the nill rate band and they use it up oldest gift first so only the youngest gifts get relief once over the cuurent nill rate band of £325k.

trulysaintly

Bridging Finance could get you the funds you need, but it would be expensive. You'd need it for a minimum of 6mths before you could remortgage the property and repay it. Obviously a legal charge on your parents property would be required - and relative legal work.

Most bridging finance costs between 0.75% and 1.5% per MONTH - bear this in mind!

holly_hobby

The posts about IHT liability are very valid - and could be a pretty penny if the unthinkable happens in the coming yrs.

You would therefore be wise to conside how any liability under the Potentially Exempt Transfer (PET) will be met. A common arrangement effected as part of estate & PET/IHT planning is that of a "Gift Inter Vivos" policy (which is in essence a 7 year decreasing term assurance policy (with the benefit written to decrease in sequence with the taper relief matrix) ) , or a level term assurance if there is no taper relief to be applied. The GSA on the policy will obviously be the calculated IHT (potential) liability.

All policies effected for the paymet of any future PET/IHT liability on an own life basis should be written in trust (to stop them forming part of the deceased estate upon death and increasing the liability even further !!). However the policy may also be written on the life of another, whereby the proceeds are payable to the policy owner (in this case you),thereby forming part of your estate.

Your adviser should be able to explain any tax consequences of any arrangement you effect - but this may well help you sleep better knowing that you have a financial safety net in place to assist with any future IHT bill that ensues.

With regards to the long term care issues and the disposal of an asset - it would also be prudent for your parents to consider/effect some long term care cover. (refer to a qualified long care adviser)

Holly