Selling house to daughter and still live in house

cliff_view

I want to sell my house to my daughter, at a 50% value and share all bills, I will continue to live in and as I still have some mortgage outstanding due to be paid early next year, this could be paid from the sale price.I had to retire early due to ill health and could not complete the mortgage without realising some of the house value and did not want to go for equity release, but my daughter cannot afford the full market value, so I have agreed a 50% price so she can own the whole house after I have passed on.
This seem to be a good way of providing a home for two families with shared costs and ensuring I don't have to go into care in the future.
What is the best way to achieve this without problems arising for either of us.?
Many thank in advance for advice
Cliff.

RAS

You need to run this past your mortgage provider; they may well not accept it.

You need to be aware that if your relationship with your daughter breaks down or she has to move (say for work) you could lose the house anyway.

Could you take a lodger to pay the mortgage? Or down-size?

G_M

RAS- my understanding is the money from daughter will be used to pay off the outstanding mortgage - so mortgage adviser irrelevant.

edit: unless daughter is getting a mortgage...

Correct cliff?

So plan is to jointly own the property 50/50 with daughter.

And she will she live in it with you?

'Deprivation of assets' would be an issue if
a)you need local authority care in the future AND
b) daughter is not living there

Inheritance tax should be unaffected.

Capital Gains Tax would be an issue if daughter did not live there

How to achieve this?
1) find a solicitor who is on your mortgage lender's panel
2) agree market value and tell solicitor sale price
3)solicitor draws up Contract and gets lender's redemption balance
4) daughter gives solicitor the cash, he pays off mortgage and gives you the balance (less bis fees)h
5) solicitor pays SDLT and registers property in joint names

Kynthia

Are you selling the whole house to her? I take it she won't move in with you? Then you may both want to take some professional advice.

Your daughter may not get a residential mortgage and may need a buy to let mortgage. This may not be easy to get depending on her circumstances and some don't like letting to family. What happens if your daughter can't afford the repayments at some point, it may get repossessed and you lose your home. She will be liable for CGT once she sells. If she one day gets divorced her ex may be entitled to half the value and may force a sale. You could be accused of deprivation of assets should you require care in the future. Your daughter won't qualify for benefits should she need them in the future as she will be a homeowner. These are a few considerations to discuss off the top of my head.

00ec25

the OP makes reference to sharing bills once the sale has completed which implied daughter will move in and live with mother

however overt confirmation of this would settle the matter

00ec25

G_M wrote: »

Inheritance tax should be unaffected.

not sure what you mean by unaffected GM

the OP is selling the house to their daughter at an undervalue (50% of the full value) and will continue to live in it

therefore the 50% that is technically being gifted to the daughter will count as a gift with reservation against the mother's estate for IHT and will remain part of her estate until the time of her death

of course if the mother's estate (and any carryover of father's nil rate band) is still below the IHT threshold at death, then IHT will be irrelevant, but its not "unaffected"

as GM says deprivation of assets may be an issue if means tested care is needed but the fact the daughter lives in the house means the house cannot be sold and the daughter put on the street, instead a charge would be placed on the property and any money owed for council care costs recovered when the daughter finally sells up

InMyDreams

00ec25 wrote: »

the OP is selling the house to their daughter at an undervalue (50% of the full value) and will continue to live in it

therefore the 50% that is technically being gifted to the daughter will count as a gift with reservation against the mother's estate for IHT and will remain part of her estate until the time of her death

Not as I understand it. As long as the daughter is living there, then the mother can gift 50% without it counting as a gift with reservation.

http://www.hmrc.gov.uk/inheritancetax/pass-money-property/pass-home-to-children.htm#5

The above link does not seem to imply that there would be any IHT issue with the daughter then paying full market value for the other half (to end up owning 100%).

I don't know if it would be possible to get a mortgage for the half that she's paying for though, should that be required.

TBagpuss

You need to take legal advice to make sure that your rights to occupy the property are protected, and to ensure that you are clear about any tax or other implications.

It sounds as though you would not necessarily be giving half of the house to her now, but selling her 1/2 with the balance to go to her on your death.

If you have any other children it is also very important that you make a will, and are very clear as to why you are making the arrangement you are, to reduce the risk of fallings out or claims after you are gone.

If your daughter is planning to get a mortgage to buy her shareof the house she will need to take advice about this, as the fact that you still live in the house and/or own a share in it, would be relevant.

DominicJ_2

Why not just sell for what your daughter can afford?
If the house is worth £100k, you have a £30k mortgage, and your daughter can afford only £80k, sell it to her for £80k, pay off your mortgage and walk away with £50k. Or sell it here for £50k and walk away with £20k

Obviously plug your own numbers in.
Move out for 6 months and rent some where else (check with some sort of competent tax adviser how long you have to move out for) and move back in after that time elapses.

00ec25

InMyDreams wrote: »

Not as I understand it. As long as the daughter is living there, then the mother can gift 50% without it counting as a gift with reservation.

http://www.hmrc.gov.uk/inheritancetax/pass-money-property/pass-home-to-children.htm#5

The above link does not seem to imply that there would be any IHT issue with the daughter then paying full market value for the other half (to end up owning 100%).

oops , you are correct, the 50% gifted will count as a Potentially Exempt Transfer (PET) not as a gift with reservation

so as long as OP lives for 7 years after making the gift then it will be outside of the Op's estate for IHT purposes

as others have said if the daughter than buys the remaining 50% at a later date (using the market value at the time of the subsequent purchases, not that at the time of the original 50%) the house is nothing more to do with the OP - provided the OP does not gift the money back to the daughter!

00ec25

DominicJ wrote: »

Move out for 6 months and rent some where else (check with some sort of competent tax adviser how long you have to move out for) and move back in after that time elapses.

:eek:
do you have any idea what advice you are trying to convey?
What on earth do you think is the purpose of moving out and then moving back in?