Two family properties in my name, need to buy own home - tax/mortgage implications?!

Star99_2

Brother 2 graduated just over a year ago and has struggled to find a job since.!
He is currently in employment and has been in that job for about 3months now.

My mums house is still the same, so I should think the value of the property will be similar to the surveyors valuation which was done a year and a half ago when I applied for the mortgage.!

The mortgage amount I took out for my mum was 40k. The house was valued at 70k. The 30k deficit was noted as a gift deposit from my mum to me.!


Re CGT, isn't that only payable on your second property?!

Tixy

CGT is payable on any property that is not your principal private residence.

It sounds reasonable that mothers house would be at the same value as when you purchased it.
Although brother 2 may stuggle to get a mortgage even for £40k if he has only been employed for such a short period of time.

What did mother do with the cash? How did she plan on being able to afford to repay the mortgage? Before you agreed to the deal did you discuss this?
Does brother 2 live in the property as well as mother?
If brother 2 cannot get a mortgage what other options have you discussed?
You could sell - but that would leave your mother homeless with only £30k equity, not enough to buy another house.
You could arrange to rent the property to mother and brother with a formal tenancy arrangement and they pay you rent that covers the mortgage - you'll need permission from your mortgage lender to do this. Obviously they would need to understand that if the rent was not paid you would be forced to end the tenancy and potentially evict them as you cannot afford to pay the mortgage.
I would make it clear to them that you cannot afford mortgage repayments and unless they come up with a solution you will fall in to arrears and the property could be repossessed.

Did mother take any legal advice about the £30k gift to you? Does she understand the implications of this re possible inheritance tax and deprivation of assets (if she needed benefits/care etc).

Cornucopia

This is all a bit of a mess, and I would be suspicious about what was said to, and done by, the original Solicitors.

00ec25

Star99 wrote: »

Re CGT, isn't that only payable on your second property?!

not quite, its payable on any property you do not live in as your main home. You own 2 properties plus you live in another with hubby. Even if you don't own the house with hubby, you don't live in either of the other 2 so are liable for CGT on both of them

as you say mother's is only 1.5 years "old" then agreed unlikely there will have been a value increase so no tax to pay, but you will still need to declare it as the value is over the threshold

MobileSaver

00ec25 wrote: »

As far as the rent and income tax thereon is concerned, you are the only legal owner, you thus owe income tax if you made a net profit after deducting all the allowable expenses – you really need professional advice as you are exposed all over the place.

It seems to me that it is the OP's brother who has been charging rent and so the saving grace is that there is no income tax worries for the OP.

scottishblondie

MobileSaver wrote: »

It seems to me that it is the OP's brother who has been charging rent and so the saving grace is that there is no income tax worries for the OP.

I'm pretty sure that as the property is solely in her name, the rent counts as her income and so she is liable to pay the tax.

getmore4less

There is also the issue that there may have been a CGT tax assesment due on mum at the time of transfer of mums house to you.


House 1 is less of an issue since you can sell and keep all the money till the tax issues are sorted and then give the brother the net proceedes.

Handy if the brother has someone ready to buy it at 150%

The issue might be accounting for any capital injections if it has been done up as they were probbly paid by the brother and not you.

mums house is an issue as there is a mortgage but you could keep the procceeds to pay off the mortgage + get back your mortgage payments, re gift the house back to mum/brother 2 and tell brother 1 that mum and brother 2 owe him the ballance after you give him whats left if any.

Does it look like brother 1 has been an iffluence in both these fiddles.

getmore4less

what happened to the £40k

Star99_2

Tixy wrote: »

What did mother do with the cash? How did she plan on being able to afford to repay the mortgage? Before you agreed to the deal did you discuss this?
Does brother 2 live in the property as well as mother?
If brother 2 cannot get a mortgage what other options have you discussed?

Did mother take any legal advice about the £30k gift to you? Does she understand the implications of this re possible inheritance tax and deprivation of assets (if she needed benefits/care etc).

20k was used to fund two family weddings. The remaining 15-20k I believe my mum still has. She advised me she and my brother 2 would pay forthe mortgage as they would both be living in that house.

The initial plan was to remove my mums house from my name to brother 2’s name once he got a job. Brother 2 lives in the property with my mum.

I last spoke to my mum re this about 2 months ago and it was agreed brother 2 would go see the bank about a mortgage. He still hasn’t done this and I don’t think he will as he doesn’t want to be responsible for the house and the mortgage payments.



We told the bank when we took out the mortgage why we were putting the house in my name and what the money was for etc. They told us to let the solicitors know about the gift deposit. They gave the sale type a name, family something, and wanted us to let the solicitors know which we did.

Neither me or my mum saw a solicitor as my brothers (brother1 and brother 3) dealt with the solicitors. So I doubt she knows about the inheritance tax and deprivation of assets you mentioned. I don't know what they are either.

Star99_2

getmore4less wrote: »

There is also the issue that there may have been a CGT tax assesment due on mum at the time of transfer of mums house to you.
QUOTE]

What would my mum have to pay?