can I sell house to daughter for less than value?

happycarrie

Im not sure if this is possible but Im sure someone knows the answer.
I own a property that until recently has been rented out and is now for sale.
Is it possible to sell to my daughter who can only raise 95,000 0f the asking price of 120,000, and I "gift" her the 25,000 deposit? I need to repay the outstanding mortgage (90,000) and fees. this would help her and her partner get on the housing ladder.

many thanks in advance

SuzieSue

Yes, there is no reason why you shouldn't do that, but not all mortgage lenders are happy with such arrangements so you will either need to see a mortgage broker or ring some lenders yourself.

You will need to pay capital gains tax if the property has increased in value since you bought it. The value on sale for CGT will be the market value (£120k) and not the price you sell it to your daughter for.

bod1467

SuzieSue wrote: »

The value on sale for CGT will be the market value (£120k) and not the price you sell it to your daughter for.

Are you sure? How do they define the "market value"?

That's like HMRC saying "I know you've had to take a 20% pay cut the keep your job, but we're still going to charge your income tax as if you were being paid at the higher rate".

SuzieSue

bod1467 wrote: »

Are you sure? How do they define the "market value"?

That's like HMRC saying "I know you've had to take a 20% pay cut the keep your job, but we're still going to charge your income tax as if you were being paid at the higher rate".

Yes, I'm sure. Market value is the value that someone who isn't connected to the seller would be prepared to pay.

happycarrie

Many Thanks SuzieSue,
I only paid 119000 for the house 7 years ago, so hopefully I wont have any CGT!
this is just an idea Ive been considering to find a solution to selling the house and helping out my daughter.

Mallotum_X

bod1467 wrote: »

Are you sure? How do they define the "market value"?

That's like HMRC saying "I know you've had to take a 20% pay cut the keep your job, but we're still going to charge your income tax as if you were being paid at the higher rate".

No its not... think about it a bit longer. How easy would it be to create all sorts of scams if it wasn't true.

bod1467

SuzieSue wrote: »

Yes, I'm sure. Market value is the value that someone who isn't connected to the seller would be prepared to pay.

And how is that calculated?

@Mallotum X ... Seller would only get in £££ the price paid. Granted the Government may lose out on CGT but the seller isn't making any money out of it - in fact the seller is losing money.

SuzieSue

bod1467 wrote: »

And how is that calculated?

It isn't "calculated" - you would need to get valuations from local EAs or surveyors or estimate the value yourself if you wanted, but HMRC could challenge it and it would be easier to prove your case if you had valuations.

Wantahouse_2

Wouldn't the value of the house still be 120k - wouldn't the OP still technically be selling it to her daughter for 120k (95k mortgage, 25k gifted deposit) - the mortgage company would see this as a value of 120k, and HMRC would most likely agree?

Or am I missing something?

Fire_Fox

Welcome! Loads of threads on this, please run an advanced search. Yes you can do a gifted deposit if the lender is willing to accept it. If your house is up for sale you may need to pay the estate agent even if you sell to your daughter, check your contract.

Does your daughter have funds set aside for legals, mortgage application, survey, three months mortgage payments in case of illness, injury, redundancy or nightmare pregnancy, money for repairs and maintenance? It's not always a good thing to become a homeowner on a low income or if you are unable to save up a deposit plus all these extra funds: only being able to raise £95K between two people rings alarm bells for me.

Suziesue is correct about CGT.

SuzieSue

Wantahouse wrote: »

Wouldn't the value of the house still be 120k - wouldn't the OP still technically be selling it to her daughter for 120k (95k mortgage, 25k gifted deposit) - the mortgage company would see this as a value of 120k, and HMRC would most likely agree?

Or am I missing something?

I think the sales price would be £95k on the transfer form as that is what she is receiving for it, and the stamp duty would be based on that.