Can you get a mortgage on a property owned by someone else?

Edtough

I plan to buy a house for cash with my father. For capital gains tax reasons, I want to put it in his name. Would it then be possible for me to get a mortgage on it, despite the property being in my father's name?

holly_hobby

No - generally only the legal owners can applied for a secured loan on the property.

A way round it, if this is all to do with CGT, would be to hold under a tenants in common arrangement -with an equal split in favour of Dad i.e 99/1, which will also reflect the split of any gain on disposal and exposure to CGT.

There are various CGT mitigations that can be applied, such as costs associated with acquistion (inc SDLT) and disposal, improvement costs, professional costs etc ....

Your tax advisor will help....

You also need to be aware that if Dad applies for state funded long term care, and if the property is solely in his name, it will be used as part of the funding ....... also if there is no will, his estate INC this property will go down the intestacy route, which means it will be split between all surivivng issue (if no surviving spoust at time of death).

So, my advice would be to hold this at least jointlyunder TIC, make sure there is a correctly executed will in place so that Dads legal share goes to you on his death .... speak to your Sol re such provision.

Hope this helps

Holly

Edtough

Great advice, thank you.

Never heard of this Tenants in Common arrangement; will have to lok into it. So the property would effectively be 99:1, Dad: Me in terms of CGT, and I could still get a mortgage?

holly_hobby

Yes, because TIC (or how the deeds are held) has no relation to the mge, to which all applicants (which are all those on the deeds) are jointly and severally liable.

You need to be aware that if Dad is on the deeds then he has to go onto any mge, which means full status checks, and the term will be restricted to his age.

I don't understand why you purchasing for cash and then want a mge ?

Also, are you aware that CGT on property is not 40%, but 18% for basic rate tax payers, or 28% for higher rate tax payers, which is chargeable on the NET SUM, after the application of all permitted deductions and reliefs ?

Have you actually sat down with a qualified practitioner on this ? Or are you just having a go yourself, without any financial or legal knowldege ?

Hope this helps

Holly

Edtough

Yes, I'm aware of all this.

Reason we are buying for cash and then mortgaging is, to be appealling to the estate agents on a popular property amongst investors. In order to pay in cash my Dad needs to free up some cash from investments. Once we've got the place, I can then get a mortgage and pay off the money owed to my Dad.

And yes we are getting some proffesional advice later today, I just wanted to educate myself a bit first.

holly_hobby

You will also need to (generally) own for at least 6 mths before any mge application is submitted (which will be on an unencumbered remortgage).

Hope this helps

Holly

Edtough

Excuse my ignorance....unencumbered mortgage?

holly_hobby

unencumbered property = mortgage free property

Edtough

Oh I see.

My plan was to port my residential mortgage rate on my current flat, onto this new house. I would then get BTL mortgage on the flat and rent it out. However, if I have to wait 6 months before I can port the residential mortgage rate, will I be able to sort of "freeze" the residential mortgage rate during this 6 months that I am waiting?

holly_hobby

Porting relates to the mge rate (not the borrowing it relates to) and is in respect of a new residential property pch (which is to be your main residence) - not transferring to a property aleady held (main residence or not), as will be the case if you pch for cash now.

Porting is also at the complete discrection of the lender, with the underlying full mge subject to new underwriting - you would also have to obtain your current lenders consent to let on your flat or seek a BTL remortgage on it.

As you are talking about renting out your current residence, are you moving in with Dad if you buy this new house, or are you moving in with/somewhere else instead ?

With regards to any future mge app you are to be party to, on the new property to be purchased (with/for Dad), your exisiting mge commitments (if not under a BTL and AST arrangement), will be included within the affordability assessment -so before you dive into this, you may want to do a bit of number crunching to see IF you will be able to remortgage in the future, given the figs - as you may find yourself in a situ where you can't source a remortgage on the property Dad will live in, so can't release your cash from the property until sold (which is where any possible CGT exposure will arise, if the property isn not your primary residence, and a gain is realised on disposal).

Holly

Edtough

Yes, I have had permission from lender to port the rate to the new property. The current property will then get a BTL mortgage.

I will be living in the new property with my other halve; my Dad will not live there. My parents have a few properties already, and have an income a lot more than mine despite being retired, so he is by no means a liability if he were to be considered in the mortgage application.

And yes, good advice about considering affordability for remortgaging, but the only other mortgage I will have is the BTL one (rental income will be 200% of the BTL mge payments).