Second property borrowing

pottsie147

Hi
I currently have a mortgage c£130K and might be gifted a second property. Can I borrow against the second property? The current value of my first property will not enable me to borrow any more than I have already.

Are there any tax implications and can the gift of the second property be challenged by a sibling?

Please advise

Thrugelmir

What's the relationship of the person gifting you the property?

Have all possible tax implications been considered?

pottsie147

It is my mother gifting the property and I can't see Inheritance Tax being an issue. Property worth approx £180K and full estate around £250K.

kingstreet

Is this her main residence?

Where is she going to live after this "gift"?

pottsie147

She will be staying in the house. Mortgage is paid off and it will only be a change of names into that of my wife and I.

Can I borrow against the security of this second property?

Any idea?

kingstreet

If the donor will continues to reside in the property you will have difficulty raising a mortgage on it.

FWIW if this is a care-fee avoidance plan, it may fall foul of the deprivation of assets rules if she has a "foreseeable" need for council-funded care.

In addition, for Inheritance Tax purposes, the property would still be treated as hers under the "pre-owned assets" and "gifts with reservation" rules if she gives it away but continues to derive a benefit from it.

Seek professional advice if your plan is designed for either of these uses.

Annisele

If you think the gift will be challenged by a sibling, your mother probably needs professional advice regardless of the tax issues.

Broadly, on what basis do you think the sibling would challenge? "My sister is greedy" would produce different responses to "my mother doesn't have mental capacity to make gifts".

CLAPTON

why are you doing this?

it is ineffective of IHT purposes
it is ineffective for the avoidance of care costs
it means what when you sell you may incur capital gains tax

it puts your mother's future on a very insecure footing against e.g. your own death or divorce (property would be owned by your wife/children and not your mother)