Ways to purchase parents home

TBAG_2

Is there a way of purchasing my parents family home without paying stamp duty/solicitors fees? Is it possible to just change the name on the deed and continue to pay the existing mortgage?

The house is worth around 450k with a 200k mortgage. If I was to purchase the house, could my parents ‘gift’ the deposit to me of around 125k? so I would get a mortgage of 325k?

Thanks

00ec25

no you cannot become the legal owner whilst the mortgage remains in your parents name.

their mortgage would have to be paid off before their lender will consent to remove its charge on the property which is what will stop you putting it in your name

therefore there is no way to avoid SDLT
the good news is that a gifted deposit as you describe is OK against a mortgage in your own name

you have not mentioned why you are doing this so we'll assume that you know all about the tax implications of becoming an owner of a property in which your parents will presumably continue to live even if you yourself do not

BitterAndTwisted

"Is there a way of purchasing my parents family home without paying stamp duty/solicitors fees?"

Nope, you can't avoid the SDLT.


"Is it possible to just change the name on the deed and continue to pay the existing mortgage?"

Nope, not if it's mortgaged.



You'd have to be on a fairly substantial salary to be able to qualify for a mortgage of £325k. And if that was the case, why buy your parents' home with a gifted deposit?



If you'd care to explain the reason/s why you need this transaction to take place, perhaps people might be able to give you some more helpful responses.

xylophone

In effect they are making you a gift of £125000/part of the house worth £125000 - will they continue to live in it?
Would be a good idea to look into IHT implications.
http://www.hmrc.gov.uk/inheritancetax/pass-money-property/pass-home-to-children.htm
http://www.hmrc.gov.uk/inheritancetax/pass-money-property/exempt-gifts.htm

BitterAndTwisted

Where are your parents going to live once they have given you half of their equity in the property as a gifted deposit?

holly_hobby

If a mge is reqd, the OP will find it impossible to obtain this if the parents are to remain resident post completion (due to the lenders standard vacant possession requirements) - family discounted pch arrangement (which is how this arrangement is termed) or not.

If the parents are to move out and live elsewhere, that solves the vacant possession issue, but some lenders will still base the pch and LTV on the actual pch price NOT the market valuation, which will rather blow the family discount arrangement - so its important to seek the assistance of a broker whom will guide you on which lenders are happy to base the LTV on market value to pch price ratio, effectively giving you the deposit reqd. (YBS are one to give you a start off)

SDLT kicks where consideration exceeds 125k, so yes you won't avoid that no matter how you play it.

If parents estate is exposed to IHT, the value of the exercise will be a PET if non-resident, and a gift with reservation if they are to remain resident (notwithstanding mge sourcing issues as discussed above).

Also consider the effect of the exercise re deprevation of assets, should it be reasonable to assume at point of sale, parents will be seeking future MT benefits/state funded long term care assistance.

Above comments re disc pch price, also based on the assumption that the property will be your primary residence on completion.

Hope this helps

Holly

BitterAndTwisted

citricsquid wrote: »

Sounds like an attempt to release equity without losing any ownership.

Sounds like a lot of things, including Deprivation of Assets.

But we won't know what strategy to suggest unless we know what the driver is.

[Deleted User]

BitterAndTwisted wrote: »

Sounds like a lot of things, including Deprivation of Assets.

But we won't know what strategy to suggest unless we know what the driver is.

oh, I was too slow to delete that post. I re-read it and in hindsight I don't think it's to do with equity, as the first question is if the deeds can "just be changed". My bad, definitely seems more like deprivation of assets.

TBAG_2

Hi, thanks for your replies. The reason for the question is inheritance tax, my parents arent getting any younger and I am aware of the 7 year rule. I earn a good salary but do not have a hefty deposit so it would also be good to make the most of earning this salary.
The plan would be for my parents to stay in the property and pay rent (only enough to cover the mortgage payment).

Werdnal

If you were buying the property but not living there, you woul dneed a BTL mortgage, and there are often clauses against "letting" to family, so many lenders would avoid you.

You would also need 25% deposit minimum, which you don't have.

I assume you would also be a FTB, and BTL lenders are wary of lending to first timers who do not already have mortgage history.

You may also fall foul of deprivation of assets ruling if your parents needed paid residential care and the transfer of the house ownership was deemed as getting rid of their assets to save paying care fees.

You will also have to declare tax on the rental income your parents pay you.

Plus, you not only want to appear to try to circumvent the Stamp Duty rules, you are also trying to avoid Inheritance tax issues too!

All in all, I think your "plan" is flawed and unlikley to happen.

Mojisola

TBAG wrote: »

The house is worth around 450k with a 200k mortgage. If I was to purchase the house, could my parents ‘gift’ the deposit to me of around 125k? so I would get a mortgage of 325k?

Your parents will have a combined IHT threshold of £650,000 at current rates.

If they have £250k of capital tied up in the house and they are worried about IHT, presumably they have over £400k in other assets. Why don't they just give you a lump sum as a deposit for a house. You can buy a house to live in; they can carry on paying the mortgage on their home.