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

kingstreet

Edtough wrote: »

Yes, I have had permission from lender to port the rate to the new property

Have you obtained permission for the circumstances you have outlined?

Many lenders will only allow you to port the rate to a mortgage you are using to purchase a new property, not to remortgage one you already own.

That would involve the BTL application and the new purchase mortgage application being simultaneous and completed on the same day.

Be careful. You can often get the answer you want without asking the right question. When you commit time and money, you then find the answer was actually incorrect.

holly_hobby

Sorry, you've lost me....

You want to pch a property for cash, and originally said you wanted to buy it in Dads name to mitigate CGT (to which I presumed he would live there, as this would be the only way to avoid CGT, if it was his primary residence).

But, you now say that Dad will not be living there, you will.

If its not Dads main residence, then keep him off the deeds as he will be exposed to CGT on sale, as its NOT HIS primary residence.

If its to be YOUR primary residence, you are not exposed to CGT on disposal on any gain, no matter how large - so if you do intend to live there, you purchase it in YOUR NAME, do not involve Dad (indeed I have no idea why you were in the first place ?).

Ok so thats sorted ....

To port your current mge deal, you would need to pch the new property with a mge from your current provider from outset, as you can't pch for cash and then port the product, as porting is only permitted in relartion to a purchase transaction.

You will need to remortgage your current flat onto a btl deal or to a new btl provider - with rental income at 125% of mge income using circa 6% as a calc figure.

Without being harsh, its evident that you need to sit down with an adviser, please ensure you do this before proceeding any further.

Hope this helps

Holly

getmore4less

Please explain how you think having this property that you will live in in your dads name will be benifitial for CGT.

it is not obvious from what you have described and may actualy make things worse

how much is your dad worth? adding to his assets could just make a bigger IHT liability.

If you are porting your mortgage and getting a BTL on your existing place is that enough to buy the place without your dad realizing his investements.


if you are porting you will need the BTL or cahs to pay off the existing mortgage + a deposit for the new place + costs.

You need to raise enough lending/cash to the full value of the new place.

Edtough

I admit, the situation is very complicated so I'm not surprised we've all got confused.

I'll explain again:

With a small mortgage, I currently own a flat, which I personally have fully restored and is now worth considerably more than I paid for it (i.e. would pay a lot in CGT if it encurred it). I intend to let this flat in the short time, and probably sell in the longer term. It is on this flat that I want to avoid CGT, not the house (yet).

I want to buy a house with cash to then live in myself. The reason I want my Dad to "own" the house is so that I only officially have one property (the flat), so would not pay CGT on selling the flat. Have I made an oversight though, in that the flat will not be exempt from CGT, despite being my only property, because it will be let?

I have explained the exact situation to the lender who has given permission to port the res mortge, but I would have to wait until I have owned the property for 6 months.

This does of course mean the BTL mortge, and porting would not be simultanoeus which is something I am trying to find a solution for.

Anyway, seen the advisor now, and he's put me straight on a few things, but has given me the professional assurance that my plan is a goer (with a few tweaks).

Thanks all.

kingstreet

Is the flat your primary residence?

If it is, it only starts to generate a gain for CGT from the point it stops being that primary residence. You don't have to pay tax on the gain from before.

For example, you buy for £100k and do it up so it's worth £200k. At that point you let it and buy elsewhere. You eventually sell it for £300k. The gain will be £300k - £200k, not £300k - £100k.

Edtough

Ah very interesting.

Yes the flat has been my primary residence for nearly 4 years.

So in your example, how do the Revenue acknowledge that the property had it's significant increase in value before you starting letting it? Dated valuations from estate agents prior to letting it?

grey_gym_sock

you can only have 1 principal private residence at a time. but you also have to live somewhere for it to be your PPR, so it can't be while you're letting it out.

i don't think kingstreet has the correct calculation (though the general idea that only part of the gain is taxable, if the property is your PPR for part of the time you own it, is correct).

grey_gym_sock

the calculation should be:

take overall gain for the whole time you owned the property e.g. £300k - £100k = £200k.

if you owned it for 10 years, and lived there for 4 of them, then those 4 years are exempt, and so are the last 3 years (unless they overlap with the years you live there). e.g. if 7 years are exempt, the gain is reduced to 3/10 x £200k = £60k.

then, if the property has been let, you can also deduct the fixed sum of £40k as "letting relief" (EDIT: actually, the lower of £40k or the amount exempt as PPR - i.e. £140k in the example figures). e.g. £60k - £40k = £20k.

that's the chargeable gain. (you also have your annual CGT allowance.)

Edtough

Oh great, thank you.

Good explanation. It doesn't look like I'll be stung so badly with CGT as I thought then.

Edtough

grey_gym_sock wrote: »

the calculation should be:

take overall gain for the whole time you owned the property e.g. £300k - £100k = £200k.

if you owned it for 10 years, and lived there for 4 of them, then those 4 years are exempt, and so are the last 3 years (unless they overlap with the years you live there). e.g. if 7 years are exempt, the gain is reduced to 3/10 x £200k = £60k.

then, if the property has been let, you can also deduct the fixed sum of £40k as "letting relief" (EDIT: actually, the lower of £40k or the amount exempt as PPR - i.e. £140k in the example figures). e.g. £60k - £40k = £20k.

that's the chargeable gain. (you also have your annual CGT allowance.)

So in this example approx speaking, the 20k chargeable gain would then be less personal CGT allowance (approx 10k) leaving just 10k chargeable gain, and then 17% of that 10k would be taxed if a lower rate tax payer? So just £1700?