Buying parents house from them ?

M635

Thanks knigstreet, you've been a great help on this and its very much appreciated.

We're probably going as a BTL, and it won't be mortgaged on all 3 of us either, may just be me and one other brother, our parents may well 'pay' a rent if we do go the BTL route, thus not causing too many problems on our own residential applications. Still in discussions between us.

kingstreet

You'll struggle to get a BTL when you intend to let to relatives. Where a property is at least 40% occupied by relatives it becomes a regulated product and many lenders won't lend on that basis.

You need to find a good independent or whole market broker to find the best way to do this.

M635

Thanks, my uncle is the broker

kingstreet

Be careful! The FSA is using the Hunter system, amongst other things, to look for fraudulent BTL cases where the income rules for a residential product are being circumvented.

Advice more for your uncle than you, by the way.

holly_hobby

This transaction and tsf of ownership of the asset, may not be assessed under GWR at all, if it falls out of IHT consideration due to its exchange for monies (which I assume is the method in the madness here), it may fall foul of POAT regs instead.

The subsequent further "gifting" back of the money used to purchase the property from Vendor to Purchaser on completion, needs to be looked at very carefully.

Leaving to one side IHT issues ... I am very concerned as to how the lender thenselves may view this "arrangement", as in effect the children are obtaining finance based on a property, with the "vendor" (their parents), essentially returning the capital to them on completion, so in essence it could be seen as a variation on a cashback mortgage - rather than Parents gifting a sum of monies to their children.

Indeed whilst the intentions may not be mge fraud, they may be viewed as a roundabout way to obtaining cheap finance to provide a deposit for their own property purchase. Accordingly, the manner in which this "arrangement" is to be administred, in my opinion, may raise eyebrows, and needs to be legally watertight and checked out, to ensure the lender understands and accepts the arrangement.

So IMHO you need qualified advice re any estate liability in respect of GWR or POAT, and poss issues regrading the return of mge finance provided to the Vendor (parents) to the Purchasers (children).

There may be nothing to worry about, it was just my first thought when I read through this ...

I won't comment on the BTL mge arranged by your Uncle for your Parents.

Hope this helps

Holly

M635

Thanks Holly, So in theory if our parents paid a rent, and the mortgage co are aware its rented to family, that is ok.

Surely if my parents then wish to give us thier savings made from the sale of the house to us, it is thier right ?

As this certainly isn't being done to commit any sort of fraud, and if its deemed as that we certainly won't proceed, we are going to be taking legal advise first, I've put it to the forum first to get opinion on tax issues

holly_hobby

BTL mortgages are unregulated.

However, if you effect a BTL mortgage on this, with your parents to reside there - regardless if they pay rent - it takes the mortgage from unregualted to regulated. You therefore need to seek a dependants mortgage (based on the applicants income) or seek a lender who provides regualted BTL finance.

As I say, my first thoughts looking at this were that this was a clever way of taking the property out of parents ownership, whilst providing the children with 100k each, which is in essence the mortgage finance they sought on the proeprty, being immediately forwarded to them as a lump sum on completion - which essentially could be viewed as a "cashback" arrangement by the lender.

There may well be no legal issues at all, but it may be wise to have this independently verified just to protect those involved.

Holly