Parents gifting house with oustanding mortgage - how?

zzzLazyDaisy

choc_mouse wrote: »

Adding my name to the mortgage seems like the easiest option but having looked at my parent's credit reports, I do not want to be linked to any of that. That would also leave me legally liable if my parents defaulted on any future debts.

Being financially linked to your parents by way of a joint mortgage may affect your credit score, but it could never make you legally liable for their debts unless you were also a signatory to or guarantor for the debts.

holly_hobby

Mojisola wrote: »

Lots of good advice already given.

I don't think inheritance tax will be a problem in this case as the parents don't seem to have any capital other than the house.

IHT is caluclated on the value of the deceased whole estate - which includes not only capital, but all assets too.

Hope this helps

Holly

CLAPTON

if you are determined to pursue the purchase option then you need to speak to a lender; either your parents lender or a mortgage broker would be a good start.
you obviously have sufficient salary to raise the mortgage and a gifted deposit of this size wouldn't be much of a problem. however, the lender may be concerned about whether your parents would still have a claim on the property in the event of you defaulting.

Once you know that caveats the lenders may impose you will be better placed to make further progress.

Mojisola

choc_mouse wrote: »

They have an outstanding mortgage of £35k. The property value a few years ago was £160k, but similar houses in the area are selling for over £200k.

holly_hobby wrote: »

IHT is caluclated on the value of the deceased whole estate - which includes not only capital, but all assets too.

Apart from the house, it appears they only have debts, so whether they keep the house as an asset or sell it and have capital, I don't see how inheritance tax could apply in this case.

holly_hobby

Mojisola wrote: »

Apart from the house, it appears they only have debts, so whether they keep the house as an asset or sell it and have capital, I don't see how inheritance tax could apply in this case.

Assets are personal chattels such as paintings, cars, antiques, valuables, insurances, investments etc ... etc.. etc ... not only a bricks and mortar property or properties ...

Without any of us knowing what the total value of the parents other assets are, in addidtion to the property, we are NOT qualified to state IHT will not apply to the parents estate on death - and could be a costly mistake of the OP to accept or act upon such assumptions. And at the end of the day it will be they who will be left to deal with any resulting issues, not any of the posters who give well meaning advice here. (and I include myself)

As stated earlier ... OP should check all advice given here with a qualified professional to ensure that any action taken is both appropriate and suitable to their requirements and family financial situation inc seeking clarification re IHT issues.

Holly

Mojisola

holly_hobby wrote: »

Assets are personal chattels such as paintings, cars, antiques, jewellery etc ... etc.. etc ... not only a bricks and mortar property or properties ...

Without any of us knowing what the total value of the parents other assets are, in addidtion to the property, we are NOT qualified to state IHT will not apply to the parents estate on death - and could be a costly mistake of the OP & siblings to assume such.

In this case, I'm sure if the parents owned anything like this their children would have encouraged them to sell the assets before putting their own money forward to reduce the 70k debt.

holly_hobby

Mojisola wrote: »

In this case, I'm sure if the parents owned anything like this their children would have encouraged them to sell the assets before putting their own money forward to reduce the 70k debt.

One would assume this would have taken place ... but we don't know if this did happen, nor what the parents do own, nor its value ..... ?

Advising on IHT liability and regs, if not aware of the full facts and qualified to do so, can be a dangerous and possibly disasterous ground to tread ...

Although I am qualified to give IHT and Tax advice - I dont know anything about the rest of the parents estate, and therefore would not attempt to 2nd guess what its worth or not. Other than the OP needs to consider his buy out of the parents, as a PET (with reservation) - and seek advice from his accountant accordingly.

Holly

JimmyTheWig

OP, Would it be easier for you to take on an unsecured personal loan for the debt?
If you are earning £38k and living at home I suspect that you could pay off the outstanding debt pretty quickly.
I presume that your parents could afford the mortgage if they didn't have the other debts.

The it would need to be written in stone somewhere (I don't know how, but must be simpler than the house gift scheme) that you are owed this money back (with interest?) when the house is eventually sold.

choc_mouse

Thanks again everyone. Good to have some fresh input on this.

IHT: Mojisola is probably right to assume there won't be any capital/assets of sufficient value to be subject to IHT. If it wasn't the house, I could only suggest bankruptcy for my parents. If we don't step in now that we know about the problem, there might not be anything left to inherit.

Holly is also right though that I should get proper advice and best not to assume...

Even if it was taxable, I'll pay it as a law abiding citizen. I'm thinking I wouldn't be out of pocket after tax, right? Just less well off. If I'm wrong, please correct me!

Thanks also zzzLazyDaisy for correcting me about debt liability. I got a bit confused about that.

holly_hobby

Max unsecured loan is 25k. But with the OPs current savings the os mge of 35k could be met.

But the OP wants to release 40k ... so we are back to the mge scene again .....

Hope this helps

Holly