Buying My Parents house To Rent Back To Them

BigAunty

Implications to consider

- if your parents need to claim HB to pay the rent in the future, I believe there are housing benefit regulations in place that forbid this for 5 years if the claimant previously owned the property and is now the tenant.

- mixing business with family is risky - we see lots of posts on this forum where tenancy or purchase disagreements between family have caused big disputes. This includes a son that had to evict his own father from the property through the courts (his dad was trashing it, concealing information from him sent by the leaseholders who were trying to buy the freehold, who stopped paying his rent).

- deprivation of capital and notional capital rules. See the Age uk website for info on this as the law is going to change soon. However, until recently, because the elderly were expected to pay for their care and sell their properties to do so, local councils often investigate applications for means tested care or care homes by the elderly to see if they've transferred their capital to others.

- benefit implications for you - if you lose your job, for example, you may find entitlement to benefits are severly compromised because of the capital that you have which you can't actually realise without making your parents homeless...

Own_My_Own

paddedjohn wrote: »

Ok no one else has asked so I will, will your parents be relying on benefits to pay the mortgage?

I was thinking that. Can't believe it got to Post 8 before anyone mentioned it.

Strapped

Own_My_Own wrote: »

I was thinking that. Can't believe it got to Post 8 before anyone mentioned it.

All the normal folk were thinking, "surely not"

00ec25

here's another one to consider... pre owned assets and income tax rules

if your parents do not pay you rent at the full open market value that you would get from renting the property to strangers then your parents (not you) will be charged income tax based on the fact that they are getting a benefit in kind because they are paying below market rent , hence they are subject to income tax

if they pay full market rent this does not apply, but if they miss a rental payment or stop paying at all then they are straight back into owing income tax

neeedles to say tax is taxing and I have simplified this, for example there is a £5,000 de minimis limit
http://www.hmrc.gov.uk/poa/

moneycrazy

The reason for doing this is to reduce there mortgage repayments so they can continue to live in the property and pass the title of house to siblings also. contracts will be drawn up for security and insurances put in place.

The queries regarding income tax are confusing because i thought you only paid tax on the profit from the renting, because they will only be covering the monthly repayment amount.

Werdnal

moneycrazy wrote: »

The reason for doing this is to reduce there mortgage repayments so they can continue to live in the property and pass the title of house to siblings also. contracts will be drawn up for security and insurances put in place.

The queries regarding income tax are confusing because i thought you only paid tax on the profit from the renting, because they will only be covering the monthly repayment amount.

HMRC will only allow you to take the mortgage interest payments into account when calculating your profit. Any repayment amounts are not counted as an Allowable expense against your tax.

tom9980

moneycrazy wrote: »

The reason for doing this is to reduce there mortgage repayments so they can continue to live in the property and pass the title of house to siblings also..

How can they pass the title on when YOU will be the new owner? it wont belong to them to pass it on.

moneycrazy

Im probably not making my self clear, the amount they pay us in rent will not be any more then the monthly repayment amount of the mortgage. the money will go in and out of the same account showing no profit or gain.

moneycrazy

Title will be passed on purchase.

Morgage_Confused

You can only use the interest element only...you cant use the whole repayment against tax.

moneycrazy wrote: »

Im probably not making my self clear, the amount they pay us in rent will not be any more then the monthly repayment amount of the mortgage. the money will go in and out of the same account showing no profit or gain.