Mortgage conundrum... trying to help my dad!!!

Thrugelmir

GreyMan wrote: »

It's current market value is approx. £175k, and the mortgage is for £75k.

Given that there appears to be a CGT liability. Then a £100k was not the initial deposit put into the property when purchased.

Who pays the mortgage?

Is the mortgage interest only or repayment?

holly_hobby

Thrugelmir wrote: »

Given that there appears to be a CGT liability. Then a £100k was not the initial deposit put into the property when purchased.

Who pays the mortgage?

Is the mortgage interest only or repayment?

Yep, I spotted this and have already asked the OP to clarify the figs involved - so hopefully he'll get back to us on that.

I presume the Dad is paying the mge, whether this is direct from his account, or he tsfs to her acct for the mge ddm to trigger is anyones guess in this tangled web !

He's bl**dy lucky really that this hasn't already gone pear shaped and she's played the game, giving the tenuous link between them - the OP must be very worried for Dads interests and I do hope we can help them find a solution that suits all - the professionals involved whom help facilitated this set up (if they knew the true facts), need stringing up !

Holly

GreyMan

Thanks everyone for the continued interest & discussion... I'm finding it all very informative and interesting, even if a few of the abbreviations are still eluding me!

A lot has been asked and I'm only on here for a few minutes, so bear with me if I don't answer everything sufficiently tonight...

I need to find out the initial purchase price from my dad, although I know it was bought as one of two cottages; the other was done up, run as a holiday let for a little while and then sold.

The mortgage was down to approx. £50k, but my dad's partner got into debt herself and nearly two years ago 'they' remortgaged to release £25k as a loan to pay off her debt. The reason we can be sure she won't be difficult during this process is that my dad is willing to take on her debt (I.e. write off the extra added to the mortgage). It's an interest only mortgage, with only 2 months left before there's no repayment penalty.

I hope that clears a few things up... I'll get a few more answers for you all tomorrow.

Many thanks once again and good night!

GreyMan

P.s. My dad currently pays his partner the monthly mortgage repayment.

holly_hobby

Hi again ...

Ok, CGT wise for her (and only in relation to the property we are discussing) ... the salient bits are acquisition price and current market value (as we know the transaction will not be classed as "at arms length" by HMRC), hat gives us her gross exposure (for mitigation where possible).

You now say that he original mge was 50k (currently 75k due to a later equity release exercise), suggesting that the original pch (acquisition) price was £150k ? With a current market value (which will to be independently verified) of 175k

If so, we have a gross gain on the asset of 25k (175k less- 150k).

So, in this particular case, the CGT calc should go something like this ...

Gross gain = 25k
LESS
Acquisition costs (conveyencing, SDLT, associated incidential fees etc)
LESS
Disposal costs (conveyencing, and any prof fees re the cgt return and obtaining a market valuation)
LESS
Any losses for the tax yr
LESS
Her unsed personal annual CGT relief (£10,600 2012/2013)
EQUALS
Her net gain for mulitplication up for tax, at either 18% (if she is a BRT) or 28% if she is HRT.

Looking at the figs and the above, I would be amazed if there is any net CGT liability at all for her .....

I have had a think about this, Dads credit record should now be clean (defaults disappear following 6th anniversary of registration).

Have you considered Dad buying on his own (subject to status/income/permitted max term and resulting repayment being acceptable and affordable) OR you and Dad buying together (which will not affect the max term, but will impact on max funding ?)

Obv if Dad buys and sells (however it is held) whenever, there will be no CGT as he is entitled to full primary residence relief on any gain.

If you and Dad buy off ex together - as I say both your and his income/status will be assessed, and the max term will be based on Dads age - but when he sells (which you feel may be sooner rather than later - so this could be a short term arrangement), ONLY YOU would be exposed to CGT on your legal and beneficial ownership share of gain. Which if you hold as tenants in common, in unequal shares i.e 99/1 or any distibution in favour of Dad, you wil only be exposed to CGT on your legal division of any gain - and with the permitted reliefs and deductions that may be applied, any actual HMRC liabilty may again be minimal to nil.


Trying to think of possible solutions all the time for you ..... if anything else pops up I'll swing by.

Hope this helps

Holly