Stamp Duty - Parents House

niallmacmillan

We are looking to buy my Mother in laws house which is valued at 260-300k. It currently has 70k outstanding on it.

We have to pay £8k+ for stamp duty if we buy the house.

Is there anyway of not paying that or the mother in law to transfer the house over to us to avoid this or maybe something else??

From researching online, there is now way we can do this. I thought I would ask you though just to confirm.

We need to take 100k out for my sister in law and there is currently 70k outstanding in the property which the mother in law pays.

The plan is we will get a mortgage for 170k (100k to sister, 70k to mother) to own the house outright. The rest of the property equity would be used for our deposit.

Any help regarding this??

pinkteapot

£260-300k is a ridiculously wide valuation - who came up with it?

If an estate agent said £260k, then they will be expecting it to sell for £250k and therefore be in the lower stamp duty band (with a bill of £2,500.

If an estate agent said £300k, they will be looking to achieve £270-280k which obviously does jump into the 3% bracket.

At the moment, that valuation range is too wide for you to base a price on. If that was what EAs suggested marketing it at, get some more round and this time say to them "I'm a serious seller (while not wanting to price it too low for a very quick sale). What should we market it at and what price are we looking to achieve?" It's the second question that people should ask and often don't.

Then, look at sold prices on Rightmove for any recent sales of similar properties.

To answer your original question though - No; you can't avoid it. If you buy a house from someone you have to pay stamp duty.

googler

Ah, the perils of doing business with friends or family.....

Could you buy it for £250k?

niallmacmillan

We are yet to have it valued by EA, it was valued last year at about 300k but after searching on right move I think its more 270k.

We could buy it at 250k but then we would be left with a lot less equity to use as a deposit.

As it is my mother in laws house, could she sell it to us for 250k if it is valued by EA at 300k?

martinsurrey

niallmacmillan wrote: »

We are yet to have it valued by EA, it was valued last year at about 300k but after searching on right move I think its more 270k.

We could buy it at 250k but then we would be left with a lot less equity to use as a deposit.

As it is my mother in laws house, could she sell it to us for 250k if it is valued by EA at 300k?

She can sell it to you for whatever she wants too, but the tax man would want stamp duty to be paid on the property at the going market rate, and they look at more properties around the thresholds to find deals like this!

What have similar houses sold for recently?

If they are higher than £250, I wouldn’t risk trying to sneak it under the stamp duty threshold.

hazyjo

Are you searching sold prices, or asking prices? A world of difference! Only compare against sold.

You'll probably find it's more like £250k.

A house is worth what someone will pay for it - EA's/sellers expect offers to be made on those asking prices. Advisable to get 3 valuations. I'd be tempted to get an actual valuer (surveyor?) anyway rather than an EA if you're considering buying.

Jx

niallmacmillan

Yes looking online at Right move and for sold House Prices it is more £250k they are selling for.

This would mean the sister and ourselves would get less equity as the house is being split evenly and there is 70k outstanding on it.

Jimbo1976

pinkteapot wrote: »

If an estate agent said £300k, they will be looking to achieve £270-280k which obviously does jump into the 2.5% bracket.

Don't you mean the 3% bracket? rather than 2.5%

Yorkie1

Not the question you asked, but is there any possibility that your MIL will need to claim means-tested benefits or go into residential care in the future?

The reason I ask is because of deprivation of assets. If the house is valued at £250K, and you buy it for £70K then your mother is depriving herself of £180K of assets (I'm assuming the £100K payment to your sister is by way of early inheritance, rather than the repayment of £100K which your mum legally owes to your sister by way of a loan, so actually it doesn't count as far as the house purchase price is concerned).

If she needs means-tested elements in the future, she can be treated as having deprived herself of that £180K, and treated as though she still has it, so not eligible for state assistance.

pinkteapot

Jimbo1976 wrote: »

Don't you mean the 3% bracket? rather than 2.5%

Sorry, yes - my mistake. Will edit.

niallmacmillan

This has been discussed with the mother in law and she is perfectly healthy and is only in her early 50s.

Yes the 100k going to the sister would be an early . How does this change things. We would still buy the property for 250k and have a 170k mortgage on the property.

The other option was to sell the family home we would get the 100k inheritance aswell. This is very long winded and a lot of work needs to be done to the property before being sold. We are quite keen to buy the family home and do the property up.