Transfer of Equity

Liberius

Can anyone help. I have been searching for the answer to my particualr problem but can't find it so I am turning to the forum.

Myself and my partner wish to buy my Parents house and was hoping to use Transfer of Equity to keep legal costs low but not sure if it's possible as we will need to remortage the property at the same time as the TofE. some sites say we can and some say we can't

Simply the house is worth £160000 and we will need a mortgage of £144000 (already approved in principle). If we 100% TofE by removing both my parents and adding me and my partner would my Parents then receive £160000 in cash? Or is this all impossible?

kingstreet

With a £144k mortgage, how are they going to get £160k if you don't put the £16k cash in?

Just buy it from them. Use the reduction as your deposit. They'll still only get £144k either way and you'll still pay stamp duty either way, if you aren't FTBs.

I'm pretty sure you'll get a better mortgage deal buying at 90% than you would remortgaging at 90%.

GDB2222

Liberius, I think that what you are really asking is whether the existing lenders will let you take over your parents' mortgage. Just ask them, and they can but say no.

I have a feeling that this is not going to work out however you approach it. Lenders are generally looking for a 10% deposit put down as hard cash. What you are looking at here is more in the nature of a vendor-gifted deposit, which lenders will no longer accept. Sorry.

GDB2222

Oh, sorry, let me check one thing. Do your parents have a mortgage, and how much is it?

kingstreet

GDB2222 wrote: »

Lenders are generally looking for a 10% deposit put down as hard cash. What you are looking at here is more in the nature of a vendor-gifted deposit, which lenders will no longer accept. Sorry.

Family gifted is still do-able.

GDB2222

kingstreet wrote: »

Family gifted is still do-able.

Family gifted cash, though.

Liberius

I suppose I was a bit vague with the details.

We don't want to take over their mortgage and we do have 16k cash (our own, not gifted) as deposit and from what I my research has shown, Kingstreet is right, I can get a better 90% Moving loan rather than a remortage. The stamp duty was expected as I have owned a house before

I was hoping it would make the process easier or cheaper but I think standard purchase of the property is the way forward.

GDB2222

So, you want to buy your parents' house from them for £160k? That's it?

Liberius

I thought there would be a benefit to TofE and remortgage to give them cash as some sites suggest (benefits like No Valuation, Lower Legal Costs). However, I'm no expert so I it may be safer to proceed with a simple purchase.

kingstreet

GDB2222 wrote: »

Family gifted cash, though.

No. I'm sure there's at least one lender allowing a reduced price sale from one family member to another with the discount being used as their deposit. I'm racking my brains to try to remember who it is.

I'll come back to you when I find it.

kingstreet

Off the top of my head, Platform has criteria to deal with the issue;-

Purchase at undervalue

The maximum LTV will be based on property value.

Only considered when:

Property is being purchased from a family member – this can be spouse, same sex partner, parent, sibling child, grandparents, aunts and uncles, nephews and nieces or where there is an obvious family connection which can be proved

The maximum loan is limited to the lower of either 100% of the contractual purchase price or 75% LTV based on the property value.

The vendor must not reside (either as an occupier or tenant).

Platform will require proof that the family member’s mortgage is up to date from the existing lender.

Where an applicant is purchasing a property from an ex-spouse and there are arrears Platform will not consider even if there is confirmation of a separation agreement/divorce.