Can I use house as a deposit?

larlemucker

Hi All,

I am currently living in my parents old house with my husband, we already own half the house and we want to buy my dad out of the other half (we were left half the house by my late mother).
Can we use the half of the house we own as a deposit or would we still need a cash deposit?

Thanks in advance!!

Senior_Paper_Monitor

Nowhere near enough detail to express any opinion about what may well be an extremely complicated legal/financial issue.

Find an experienced broker and possibly a solicitor as well.

If you are genuinely tenants in common with 50% shareholding it may well be fairly easy (and the equity would be acceptable as deposit) depending upon your finncial circumstances, but I can imagine a 'shed load' of issues which may complicate this.

larlemucker

What detail would you need??

We are genuine tenants, we own half the house and pay my dad rent for the other half. We are very lucky that he is happy for us to buy the house from him for whatever we can afford but we have minimal savings for a deposit and would prefer to use the half of the house we own instead of our savings.

What kind of issues do you think may complicate it??

Senior_Paper_Monitor

Any mortgage (I'm guessing not from last post) ?

Father's financial position, age, state of health and residence arrangements ?

The 'whatever we can afford' is an issue in its own right - as is the paying of rent (various potential tax issues on top of deprivation in both areas)

Your own employment/income details ?

Certainly the XX% equity can be your deposit if everything else matches up for the mortgage portion.

Please don't think I'm saying this necessarily bad, difficult or anything else (just warning it may not be as straighforward as 'first look' seems)

CLAPTON

does your father live in the house?

holly_hobby

larlemucker wrote: »

Hi All,

I am currently living in my parents old house with my husband, we already own half the house and we want to buy my dad out of the other half (we were left half the house by my late mother).

Ok .. this is called a transfer of equity (TOE) in that you want to pch the remaining equity from your Father. As you are already part owners of the propety, this is classed as a remortgage and not a purchase.

larlemucker wrote: »

Can we use the half of the house we own as a deposit or would we still need a cash deposit?

As stated above, this is classed as a remortgage for mge purposes

Question ?
do you need a mge to buy him out? (which I think is the case)
or
are you buying him out with cash you have?


If you need a mge to buy him out - some basic guidance on the procedure ...

1. apply for mge with selected lender (if there is no current mge you need a lender who will accept unencumbered properties)
2. you are asking for an advance to pch an existing parties share (Dad)
3. as part of the conveyencing, there will be a transfer of equity (TOE) removing Dad from the deeds/legal ownership, which will be in addition to any standard conveyencing costs.
4. you shall need to satisfy the lenders status checks inc income
5. all adults post 17 yrs of age who are not party to the mge, but will reside in the property post completion, shall be required to sign a consent to vacate on behalf of the lender
6. your father should be classed as being of sound mental capacity, to understand the legal documents he is required to sign in releasing his interest in the property. If he has any mental health issues (and no LPA in place) this will complicate matters (please don't take offence by this point, its just something to be aware of)

Thats the mge side of things generally covered ... seek a whole of market broker for the most suitable mge lender and product available.

Now on to other things ....

Not knowing the figs involved ...

Possible problems with:-

• deprevation of assests (as already mentioned by SPM) which in laymans terms, is in relation to the qualification for any long term care state funding your Dad may need/seek in the future.
• IHT prob - if Dads estate exceeds the nil band threshold on death (within 7yrs of event), and he sells you his share for less than market value i.e a gift. Further complicated if he continues to reside in the property, as this becomes a gift with reservation and this further affects PET (potentially exempt transfer) regs.
• stamp duty if share is transferred for monetary exchange

You need prof advice from a solicitor & Whole Of Mkt broker to ensure that all aspects of your pch, future long term care provision (and if necessary estate planning) are carefully and thoroughly considered and addressed pre TOE.

Hope this helps

Holly

larlemucker

no my father does not live in the house and hasn't for at least 5 years and he is of sound mental capacity.

holly_hobby

Ok, then his signing over of his interest is uncomplicated.

CGT - as the property is not Dads main residence, he may be liable to CGT - I won't go into the ins and outs, your sol will be able to advise if there is a liability on any gain, after the deduction of his annual CGT allowance. (last 3 yrs of ownership disregarded for cgt calcs).

All other aspects discussed earlier remain unchanged - don't forget you & your income shall have to satisfy the lenders status checks, for any borrowings reqd to pch Dads share

You need to seek the svcs of a whole of market broker, whom will guide you through the process and find the most suitable lender based on your status and your requirements.

Hope this helps

Holly