Try get your head around this?

niallmacmillan

We are looking to buy my Mother in laws house (family home).

It was valued last year at 300k but after online and local research I would say more realistically 270K.

The house was mortgage free. The idea was eventually the property would be sold and split 3 ways for inheritance to my partner and my sister in law.

The mother in law withdraw 70k of equity on the property 16 months ago and bought another property that she now lives in.

The family home is now being lived in by my sister in law (who eventually will inhert, she pays rent to the MIL which pays for the 70k outstanding.

The idea was the house would now eventually be split like this

If valued at 270k

My partner -100k
Sister in law - 100k
Mother in law 70k

The MIL suggested an idea that my partner & I buy the house and use the 100k equity as our deposit for 170k mortgage, give 100k to the sister and 70k to the MIL so we can buy the house outright.

This gives the sister 100k to have a deposit and to get on the property market. (Sister has no interest of buying the family home)

Then the mother 70k to pay of her mortgage

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??

Can the MIL value the property at 249.999 and if so how much of an effect will this have.

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

Any help regarding this??

jbainbridge

Didn't you ask this question the other day?

picklepick

Deja vu...

Wantahouse_2

There are now 3 posts for this - Links to other 2 below

https://forums.moneysavingexpert.com/discussion/4169831=

https://forums.moneysavingexpert.com/discussion/4174443=

niallmacmillan

Well now I feel silly.

Just thought I would play the field a little bit

Apologise for the Dejavu......

Im still not 100% sure of the way around this.

PasturesNew

The house needs to be valued at £250k... plenty of £300k houses reduced to £250k already in most areas.

At £250k the split would be:
£70k for mother's mortgage
£90k to sister in law
£90k to you

.... and at some future point you can bung the sister in law £10k

googler

The "Master Thread", with most replies, is -

https://forums.moneysavingexpert.com/discussion/4169831

Please post there with anything to contribute

pinkteapot

niallmacmillan wrote: »

The idea was the house would now eventually be split like this

If valued at 270k

My partner -100k
Sister in law - 100k
Mother in law 70k

The MIL suggested an idea that my partner & I buy the house and use the 100k equity as our deposit for 170k mortgage, give 100k to the sister and 70k to the MIL so we can buy the house outright.

To be precise, what would happen would be that you buy the house from MIL for £270k. You would not be able to hand over a deposit on exchange of contracts because the deposit is tied up in the house itself, although this shouldn't be a problem as obviously your MIL won't mind.

You would apply for a mortgage for £170k. On completion, that £170k would be paid to your mother. Your MIL would then give your SIL £100k from the sum (you wouldn't give your SIL anything yourself).

When you apply for mortgages, you will need to explain the deposit situation to the lender (as you aren't funding the deposit yourself). They will want to understand where the deposit is coming from, and will want something from MIL to say that she is gifting you the £100k and will not maintain any sort of claim on the house/money. Use a broker to get a mortgage as it's not a bog standard purchase situation.

niallmacmillan wrote: »

This gives the sister 100k to have a deposit and to get on the property market. (Sister has no interest of buying the family home)

One slight problem with the timing. Your mortgage lender will want the house handed over to you on completion with vacant posession. Where will SIL go? After completion your MIL will give her the £100k but then she will need to look for and buy a house which takes a few months at least. Is she going to move out prior to completion and rent something else? If she's going to stay in the house, you'll move in, then she'll move out when she finds somewhere, you will need to mention to your lender that you'll have a lodger from the outset (again, get advice from a broker).

niallmacmillan wrote: »

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

Yes.

niallmacmillan wrote: »

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??

As mentioned in other threads, no.

niallmacmillan wrote: »

Can the MIL value the property at 249.999 and if so how much of an effect will this have.

If the mortgage lender's survey gives it a valuation of £270k, the effect it will have is likely to be HMRC taking a keen interest in the sale in terms of SDLT avoidance.

If the sale goes through at £250k and the valuation agrees this value, that will be the price. The amounts going to each party (currently £100k/£100k/£70k) should be reduced. If your MIL needs £70k to pay off the mortgage, you and SIL should get £90k each instead of £100k. Then, you would need a mortgage for £160k instead of £170k (buying a £250k house with £90k deposit and a £160k mortgage).

jbainbridge

A very good answer!

niallmacmillan

Thats sums things up perfectly and thanks for your time reading my posts and explaining it in a dummys guide. (Just what I needed)

BUT......

I have received this response from another source

If your partner is entitled to £100K of the house then you should only be paying £170K for it. You need to be upfront with mortgage lenders and explain that house is worth £270K so why can't they lend you £170K on a house worth £270K even though you are only paying £170K for it as they will have a security which they can realise for £270K?

This is very important - don't let financial advisers complicate the issue - with imaginary deposits etc - the fact is you only want to pay £170k for the house and that's what it is worth because your partner already "owns" £100K of it. Therefore you should only have to pay £1700 SDLT because that is what you are actually paying.

SDLT is based on the price actually paid and questions of market values only come in when there is some obvious fiction created to disguise the real nature of the transaction. If MIL owned it outright and want to sell it to you for only £250K then if that's all you paid the SDLT would only be £2500. There could be other implications - but not for SDLT.

Is this possible or should I completely disregard this?

googler

googler wrote: »

The "Master Thread", with most replies, is -

https://forums.moneysavingexpert.com/discussion/4169831

Please post there with anything to contribute

....and yet people continue posting here.....

OP, you now see what happens when you post the same thing in three different threads?